Weekly COT Report: EUR Bears Load Up Ahead Of ECB

Trading Themes: Sentiment remains mixed with regard to US rate-hike expectations. Following on from stronger core CPI and 4Q GDP data, the latest employment data showed that despite a firm Non-Farm Payrolls print, wage-growth is softening with Average hourly earnings falling MoM for the first time since 2014. Lack of key US data this week takes USD out of the spotlight for now with focus on the ECB which is likley to be USD supportive

EUR: ECB Key focus of the week,  markets heavily expectatnt of further easing.
GBP: Brexit concerns to continue to drive price action.
JPY: Depreciation underperforming compared to recovery in risk markets.
AUD: Positioning and risk-sentiment support further uspide. Keep an eye on China data.
CAD: BOC expected to remain on hold, Friday’s employment data eyed.

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, increased on the week
  • CHF neutral, flat on the week
  • AUD bullish, flat on the week
  • CAD bearish, flat on the week

EURUSD Outlook – Bearish

Stronger equities markets continue to weigh on EUR as we head into the key March ECB meeting where markets are expecting the central bank to announce further measures. Reports on Friday stated that there was as yet no ECB consensus beyond a further deposit rate cut of 10bps. Following on from the ECB’s December meeting where the ECB disappointed markets by failing to surpass baseline expectations, traders are keen to see whether the ECB can properly deliver this time around.

COT Indicators

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

LFOrder Flow Trader Bullish

EUCOT

GBPUSD Outlook – Bearish

Despite a slew of weak PMI data sets and continuing Brexit concerns Sterling was able to forge a recovery higher last week driven by improved risk-sentiment. The UK Markit Services PMI dropped to a three-year low of 52.7 showing that Britain’s recovery from the financial crisis is losing momentum and why policymakers from BoE have said they stand ready to boost the economy if needed. Domestic data focus this week will be on Trade Balance & GDP estimate.

COT Indicators

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

LFOrder Flow Trader Bullish

gucot

USDJPY Outlook – Bullish

Amidst a firm recovery in risk sentiment last week, JPY weakened in the absence of safe-haven demand. BOJ’s Kuroda commented this that for the time-being the central bank is not considering a further reduction in Japan’s now negative interest rates and instead is allowing time to monitor the situations and subsequent effects. Japanese 4Q GDP will be key domestic data focus on Monday. BOJ’s Kuroda commented this morning that the BOJ are done easing for now and will leave some time to assess the effects of recent adjustments.

COT Indicators

  • Strength active sell signal, ticks down
  • Index active sell signal, ticks down
  • Momentum flat, awaiting new signal

LFOrder Flow Trader Bullish

ujcot

USDCHF Outlook – Bullish

The upcoming ECB meeting will be very important for the Swiss Franc and future SNB policy. SNB’s Jordan has warned previously of a “nuclear” option in the event of continued CHF appreciation stating that the SNB can cut the exemption from negative deposit rates that it extended to most domestic banks’ reserves. If ECB is more aggressive than markets expect on Thursday then this would increase the likelihood of the SNB being forced into action in coming months.

COT Indicators

  • Strength active buy signal, ticks down
  • Index active sell signal, ticks down
  • Momentum flat, awaiting new signal

LFOrder Flow Trader Bearish

uchfcot

AUDUSD – Outlook Bullish

The Australian Dollar was driven sharply higher last week as a combination of improved risk sentiment, USD weakness and positioning conspired to support the Antipodean currency. CFTC COT positioning data shows that AUD positioning has flipped net-long for the first time since 2015 as the Aussie surges higher in tandem with the breakout in Gold.

COT Indicators

  • Strength active buy signal, tcisk up
  • Index active buy signal, consolidates gains
  • Momentum active buy signal, ticks up

LFOrder Flow Trader Bullish

aucot

USDCAD OutlookBullish

Continued strength in Oil markets has seen the Canadian Dollar establishing a further recovery as investors dial back BOC easing expectations ahead of the central bank’s March meeting this week. Despite US Crude Oil Inventories continuing to show record builds, market is driven by optimism for an OPEC deal to halt production at January levels. Key data focus this week will be the BOC rate decision on Wednesday.

COT Indicators

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

LFOrder Flow Trader Bearish

uccot