Market sentiment analysis:

  • Market confidence is picking up on hopes that the Omicron coronavirus variant will be less damaging economically than once feared.
  • That’s boosting risk-on assets such as stocks while lessening demand for safe havens such as the Swiss Franc and the Japanese Yen.

Trader confidence returning

Trader confidence is picking up after Sunday’s comments by the White House’s chief medical adviser Anthony Fauci that early data on the Omicron coronavirus variant is encouraging, and the early data from South Africa suggesting it may cause less severe illness than previous strains.

That is boosting global stock markets while reducing the appeal of haven assets such as the Japanese Yen and the Swiss Franc… trends that could well continue as it becomes increasingly likely the Omicron variant will do less damage to the global economic recovery than once feared. This could result in a recovery in crosses such as EUR/CHF.

EUR/CHF Price Chart, Daily Timeframe (June 21 – December 7, 2021)

Latest EUR/CHF price chart

Chart by IG (You can click on it for a larger image)

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Bullish EUR/CHF signal from sentiment data

IG client positioning figures back this idea, with retail trader data showing that 73.49% of traders in EUR/CHF are net-long, with the ratio of traders long to short at 2.77 to 1. The number of traders net-long is 4.69% lower than yesterday and 3.17% lower than last week, while the number of traders net-short is 5.48% higher than yesterday and 14.93% higher than last week.

Here at DailyFX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests EUR/CHF may fall. Yet traders are less net-long than yesterday and compared with last week, and these recent changes in sentiment warn that EUR/CHF may soon move higher despite the fact traders remain net-long.

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

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