Be Alert With Safe Trade

1) Australian Dollar Tops US$0.80, Eyes Best Weekly Run Since Mid ’16
2) Pound Strength to Continue Based on Sentiment
3) Bitcoin May Trade Higher Despite Sentiment
4) Oil bears gain ground on gasoline inventories

1) Australian Dollar Tops US$0.80, Eyes Best Weekly Run Since Mid ’16

AUD/USD has inched back above the important psychological resistance level of 0.800 Friday and looks set for a sixth straight week in the green.

The Australian Dollar has had the benefit of a powerful combination of domestic and offshore factors in its corner over the last month or so. Consumer sentiment and retail sales have picked up nicely, where once they lagged. Job creation remains extremely strong overall, despite a rather mixed bag of numbers this week.

China’s growth can never be far away from the Aussie’s fortunes given the vast trade links between Australia and Asia’s number one economy. So news that official Chinese GDP expansion topped forecasts for 2017 will have added some cheer. Romping in at 6.9%, it also exorcised to some extent the demon of 2016’s 6.7%-a 26-year low.

Add to all this some decidedly shaky sentiment towards the US Dollar and it’s no surprise that AUD/USD should be sitting very pretty.

If the Aussie does close higher this week it will be looking at its longest weekly winning streak since the middle of 2016. However, we may also be approaching the rarified atmosphere where some pause for breath is appropriate, even if the climb resume afterwards. It may well do. AUD/USDs 20-day moving average has crossed back above both its 50- and 100-day counterparts in the last month. That’s usually held to be quite a bullish sign.

2) Pound Strength to Continue Based on Sentiment

Retail trader data shows 34.1% of traders are net-long with the ratio of traders short to long at 1.93 to 1. In fact, traders have remained net-short since Dec 28 when GBPUSD traded near 1.33732; price has moved 3.8% higher since then. The number of traders net-long is 8.2% lower than yesterday and 17.6% lower from last week, while the number of traders net-short is 6.2% lower than yesterday and 14.6% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger GBPUSD-bullish contrarian trading bias.

3) Bitcoin May Trade Higher Despite Sentiment

Retail trader data shows 76.3% of traders are net-long with the ratio of traders long to short at 3.22 to 1. The number of traders net-long is 4.9% lower than yesterday and 4.8% higher from last week, while the number of traders net-short is 3.7% lower than yesterday and 16.9% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Bitcoin prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Bitcoin price trend may soon reverse higher despite the fact traders remain net-long.

4) Oil Bears Gain Ground on Gasoline Inventories

Oil has been one of the standout trades in 2017 and so far in 2018 it has looked positive. One of the reasons behind that has been the constant draw down’s in inventory in the US which has helped push up prices further. Today’s reading was of course a mixed signal with a strong draw down of -6.86M barrels (-3.15M exp).However, the bears managed to take hold and push oil prices lower. The reason behind this of course has been gasoline inventories which continue to show build ups in surplus, even as the US gets a polar blast recently. Oil traders are continuing to look for this number to drop further to showcase that there is still plenty of demand there for refined oil products, despite the drawdown’s in oil inventory. So for now, while OPEC’s message is clear and it has worked, the US does need to see some draw down’s in refined products in order to help propel oil prices higher.