Weekly COT Report: CAD Bears Back Off

Trading Themes: The US Dollar was broadly weaker over last week extending losses from the release of the dismal September jobs report. FOMC minutes release was Dovish citing increased downside risk to inflation and global growth. Markets continue to push rate-hike expectations into next year with CME Fed Watch now pricing only a 39% chance of a December hike with March 2016 the first full pricing. Given the focus on the inflationary environment currently, traders will be closely watching this week’s US CPI print expected to highlight a dip into deflationary territory at -0.2%.

  • EUR: Firmer as monetary policy divergence theme dilutes as FOMC minutes suggest hopes of 2015 rate hike are fading
  • GBP: First weekly advance in three weeks but still hampered by domestic data concerns
  • JPY: All about the end of month BOJ meeting as market marks time ahead of anticipated policy action
  • CHF: SNB remain anchored to negative rates policy and stand ready to intervene further
  • CAD: Reversal form 11 year high prints persists as commodities recover
  • AUD: Printing seven week highs driven by recovery in commodities and China sentiment

Let’s take a look at what the latest COT data is showing us from a trend and net change week over a week perspective…

  • EUR bearish, flat on the week
  • GBP neutral, flat on the week
  • CHF bearish, flat on the week
  • JPY bearish, decreased on the week
  • AUD bearish, decreased on the week
  • CAD bearish, decreased on the week

EURUSD – Outlook Bearish

The single currency was higher last week amidst Dollar weakness whilst continuing to rotate around shifting risk sentiment. The strong inverse correlation with risk seemed to breakdown last week as Equity markets traded higher also. ECB minutes release saw the ECB citing increased downside risks to inflation and the willingness to intervene further if needed though no extension of QE has been discussed as yet. Comments made by the ECB’s vice president during an interview at the IMF’s yearly meeting stated that lower oil prices and a fall in the Euro would boost the EuroZone economy, downplaying the need for further stimulus. German ZEW survey is key data focus this week.

COT Indicators

  • Strength active sell signal, ticks up
  • Index active buy signal, ticks down
  • Momentum active buy signal, continues retreat from 2015 highs

LFOrder Flow Trader Bullisheu1

GBPUSD – Outlook Bearish

September services PMI data disappointed UK bulls last week showing marked weakness with a print of 53.3 against the expected 56. Sterling was weaker across the board except for strength seen against the Dollar & the Yen. The BOE’s October meeting saw the Central Bank striking a more Dovish tone than expected stating their view that inflation was likely to remain below 1% until spring of 2016. Sterling received some support from comments made by BOE’s Carney during the IMF session that a UK rate hike was independent of Fed lift-off timing as he reiterated his view that the issue of a rate rise will come into play around the start of 2016. Traders will be focused on UK CPI this week to see if the UK has once again managed to avoid dipping back into deflation

COT Indicators

  • Strength active sell signal, ticks away from convergence
  • Index active buy signal, ticks down
  • Momentum active buy signal, ticks down

LFOrder Flow Trader BullishGU1

USDJPY – Outlook Bullish

Focus last week was on the BOJ October monetary policy statement with some players expecting the Central Bank to increase its stimulus. However, the BOJ made no policy adjustments and dismissed the idea of negative rates in the near future. JPY was broadly weaker amidst reduced safe-haven flows as commodities rebounded. Despite the monetary policy statement there is still a large expectation that the BOJ will increase stimulus on October 30th. As well as being driven by US data, JPY will also be sensitive to Chinese data this week with any data weakness likely encouraging safe-haven support for the Japanese currency.
COT Indicators

  • Strength active buy signal, ticks down
  • Index active sell signal, ticks lower
  • Momentum active buy signal, ticks down

LFOrder Flow Trader Bearishuj1

USDCHF – Outlook Bullish

SNB Chairman Thomas Jordan repeated a pledge to maintain negative interest rates and intervene in currency markets if needed. He also mentioned the chance for further drop of wages and prices was limited if oil price stopped falling. USDCHF dropped to an intraday low of 0.9582, its lowest since mid-September, against the backdrop of weak US dollar across the board. With no domestic economic announcements as well as a bank holiday scheduled in the US, the pair is now trading sideways near 0.96

COT Indicators

  • Strength active buy signal, continues to tick up
  • Index active buy signal, ticks up
  • Momentum active buy signal, ticks up

LFOrder Flow Trader Bearishuchf1

AUDUSD – Outlook Bearish

The Aussie strengthened across the board last week maintaining strength amidst short reductions following the RBA’s neutral meeting and a continued rebound in commodity markets fueled further by the Dovish FOMC minutes. Domestic unemployment data this week is expected to see the unemployment rate tick up to 6.3%, price will also be sensitive to Chinese data and the possible consequences for the global risk environment should we see a particularly weak or strong data.

COT Indicators

  • Strength active sell signal, ticks up
  • Index active sell signal, ticks up
  • Momentum active sell signal, ticks up

LFOrder Flow Trader BullishAU1

USDCAD OutlookBullish

The rebound in Oil prices last week has seen the Canadian Dollar continue to strengthen, recovering ground sharply against the US Dollar. Friday’s employment data put a dent in an otherwise shining week for the Loonie as the unemployment rate was seen to tick up to 7.1%. An absence of tier one domestic data this week will leave the Canadian Dollar trading outlook driven by US & Chinese news and the path that oil takes.

COT Indicators

  • Strength active buy signal, ticks up
  • Index active buy signal, ticks down
  • Momentum sell signal, ticks down

LFOrder Flow Trader Bearishucad1