Weekly COT Report: Sterling Bears Pile Back In

Trading Themes: A quiet data week saw muted USD flows though USD gained over the week amidst the broadly risk-off tone with commodities under pressure. Recent data keeps the US rate-path mildly supported with the possibility of a rate hike still looming. Focus now shifts to this week’s FOMC meeting with traders keenly waiting clues in the Fed’s language as to the likely rate-path over the months ahead

EUR: ECB keep rates on hold and downplay Brexit impact. CPI & GDP data next
GBP: Latest PMI (Post-Brexit period) data shows fastest economic contraction since 2009.
JPY: BOJ in focus this week with traders awaiting details of stimulus though “helicopter money” has been dismissed
CHF: Rate cut expectations build with market pricing higher than 80% chance of cut by September
AUD: Q2 Inflation data in focus ahead of upcoming RBA meeting. Weak figure raises chance of further easing.
CAD: Oil weighs hevaily on CAD as over-supply fears build again. GDP data on Friday key domestic data focus

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

  • EUR bearish, increased on the week
  • GBP bearish, increased on the week
  • JPY bullish, decreased on the week
  • CHF bullish, decreased on the week
  • AUD bullish, increased on the week
  • CAD bullish, increased on the week

EURUSD Outlook – Bearish

The ECB kept rates on hold as expected but were less forthcoming regarding the likelihood of further easing than some players were anticipating. The ECN downplayed Brexit risks and although downside risks were noted, growth and inflation were both forecast to pick up I the medium term. EZ CPI & GDP data on Friday will be the key domestic data focus this week.

COT Indicators

  • Index active sell signal ticks lower
  • Strength active sell signal ticks down
  • Momentum sell signal ticks up

LFOrder Flow Trader Bearish

eucot

GBPUSD Outlook – Bearish

In May, UK unemployment rate fell below 5.0% for the first time since 2005. Jobless rate dropped to 4.9% before Brexit as 176k jobs were added to the labour market in the three months through May. Average Weekly Earnings over the period remained steady at 2.2% whilst CPI in June printed above expectations at 0.5% vs 0.4% on the headline reading and 1.4% vs 1.3% on Core. PMI data on Friday confirmed economic fears with all three data sets printing below 50 for the July period marking the fastest economic contraction since 2009. GDP data is key domestic focus this week.

COT Indicators

  • Index sell signal ticks lower
  • Strength sell signal ticks down
  • Momentum signal turns flat

LFOrder Flow Trader Bullish

gucot

USDJPY Outlook – Bearish

The International Monetary Fund downplayed the need for Japan to weaken its currency to boost economic growth and inflation, saying the yen’s moves have been orderly and that government intervention isn’t advised. In comments made on radio this week BOJ Governor Kuroda ruled out the prospect of “helicopter money” saying there was both no need and no possibility. Traders now await the BOJ meeting next week to learn the details of the stimulus package ordered by PM Abe.

COT Indicators

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

LFOrder Flow Trader Bearish

ujcot

USDCHF Outlook – Bearish

Rate cut expectations, with market pricing a higher than 80% of an SNB cut by September, continues to weigh on the safe-haven Franc. Resurgent USD strength on better US data has also added pressure in recent sessions. Following Brexit the SNB commented that they did infact intervene in the market to “stabilize the situation and will remain active in the market” to offset CHF buying. June CPI held steady at -0.4% against expectations of -0.5%.

COT Indicators

  • Strength buy signal ticks higher
  • Index sell signal ticks up
  • Momentum active sell signal turns lower

LFOrder Flow Trader Bullish

uchfcot

AUDUSD – Outlook Bullish

The RBA July meeting minutes left room for easing in the central bank’s next meeting in August. Staff will provide update on inflation, labour market and housing market activity outlook in the Statement of Monetary Policy, allowing the Board to “make any adjustment to the stance of policy that may be appropriate”. With inflation expected to remain quite low for some time and Australian dollar stronger than preferred level, RBA may ease again next month to spur growth. Focus now shifts to the Q2 inflation reading this week which will be used by traders to gauge the likelihood of further easing at the RBA’s upcoming meeting.

COT Indicators

  • Strength active buy signal ticks up
  • Index active buy signal ticks higher
  • Momentum sell signal ticks up

LFOrder Flow Trader Bearish

aucot

USDCAD OutlookBullish

The Canadian Dollar was under pressure this week weighed upon by the decline in Oil prices which were hit by a resurgence of oversupply fears. The US Energy Department registered a ninth straight week of drawdown in crude stocks though inventories remain near record levels.  Canadian CPI on Friday printed above expectations on both core and headline readings. Traders now turn to GDP data on Friday.

COT Indicators

  • Strength sell signal ticks down
  • Index active sell signal ticks down
  • Momentum signal turns flat

LFOrder Flow Trader Bullish

ucot