FX Overbought/Oversold: Commodity FX Overbought Amidst Broad Downtrend

Technical Analysis via RSI Key Takeaways:

  • Commodity FX stands on the extreme overbought
  • European Currencies weaken alongside havens backing hedge fund positioning
  • JPY stands weak in opposition to option sentiment

Commodity FX is bid at a time when commodities appear to be struggling. Some traders will look to commodity FX as a harbinger of risk sentiment. If the signal holds, traders see opportunities in high-yielding FX that would equate to commodity currencies as well as Emerging Market Currencies like the Mexican Peso.

The specific extremes within the G10 and crosses sits with the Australian Dollar and New Zealand Dollar with marked weakness in the European Currencies and the US Dollar.

Surprisingly, the US Dollar would now qualify as a high-yielding currency, given the forwards markets expect the Federal Reserve to have a higher reference rate than the Reserve Bank of Australia one year from today. However, concerns are lingering regarding the G10 as trade rhetoric heated up against Europe and China against the US over the weekend.

For traders looking for a fundamental justification to the AUD-bid, The Australia Prime Minister Malcolm Turnbull confirmed that Australia won a reprieve from the United States’ global steel and aluminum tariffs

Article source: https://www.dailyfx.com/forex/technical/article/forex_strategy_corner/2018/03/12/FX-Overbought-Oversold-Report-Australian-Dollar-Trump-Euro.html?DFXfeeds=forex:technical:article:forex_strategy_corner