Market sentiment analysis:
- Trader confidence remains high, with strong corporate earnings among the factors helping stocks at the expense of safe-haven assets like the US Dollar.
- These trends look set to continue near-term over a week dominated by central bank meetings.
Trader confidence high
Trader confidence remains at elevated levels thanks to strong corporate earnings and a variety of other factors such as US/China economic and trade talks, and Iran/EU discussions on reviving the nuclear deal previously in place.
Those trends will likely remain in place near term over a week dominated by central bank meetings in the EU, Japan and Canada, with the S&P 500, for example, looking strong after the recent consolidation.
S&P 500 Price Chart, Daily Timeframe (May 18 – October 26, 2021)
Chart by IG (You can click on it for a larger image)
Bearish signal for AUD/JPY
In the meantime, IG client positioning data are sending out a bearish signal for AUD/JPY. The retail trader numbers show 30.25% of traders are net-long, with the ratio of traders short to long at 2.31 to 1. The number of traders net-long is 61.90% higher than yesterday and 17.24% higher than last week, while the number of traders net-short is 4.39% lower than yesterday and 10.73% higher than last week.
Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests AUD/JPY prices may continue to rise.Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current AUD/JPY price trend may soon move lower despite the fact traders remain net-short.
AUD/JPY Client Positioning – IG Client Sentiment
In this webinar, I looked at the trends in the major currency, commodity and stock markets, at the forward-looking data on the economic calendar this week, at the IG Client Sentiment page on the DailyFX website, and at the IG Client Sentiment reports that accompany it.
— Written by Martin Essex, Analyst
Feel free to contact me on Twitter @MartinSEssex