Weekly COT Report: USD Longs Continue To Reduce

Trading Themes: The release of the March FOMC minutes largely confirmed market expectations that the Fed will not be moving on rates in April. Two members were seen in favour of a rate move but only one voted whilst other members expressed caution with regard to hiking in April and indeed some members expressed caution with regard to hiking rates at all. These minutes come on the back of recent comments by Fed chair Yellen who expressed concern for the global economy as a key determinant of her view on the likley 2016 rate path. Attention this week will now turn to Retail Sales and CPI data with the latter expected to show some improvement in March.

EUR: As EUR strengthens, traders less concerned that ECB will look to target the currency with focus instead on EMFX weakness
GBP: Brexit concerns still plague the outlook. BOE Rate Decision on Thursday key event risk
JPY: JPY underpinned by huge foreign investor outflows with recent bond outflows at their largest level since 2008
CHF: A lack of EUR downside keeps the pressure off the SNB for now. CPI & Unemployment eyed next.
AUD: USD weakness paves way for further AUD upside though traders wary of RBA
CAD: BOC Rate Decision the key domestic event risk.

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

EURUSD Outlook – Bearish

EURUSD remains supported as the policy divergence trade which favours USD upside continues to weaken in the wake of recent Dovish comments by Fed chair Yellen and the release of the March FOMC minutes. As EuroZone data continues to disappoint, ECB chief Mario Draghi commented last week that the central bank had no shortage of tools available to drive up stubbornly low inflation, and would continue to do “whatever is needed”. March EuroZone CPI comes into focus later in the week.

COT Indicators

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

LFOrder Flow Trader Bearish

eucot

GBPUSD Outlook – Bearish

Brexit concerns and weak domestic data keep Sterling under pressure. Britain’s industrial output suffered at the fastest rate since Q4 2012 and the trade deficit ballooned to its widest in eight years, according to data released Friday, adding to worries of broader economic slowdown. Markets believe Britain’s economy faces risk amid slowing economic growth in China, falling commodity prices and whether stay in the European Union or not. BOE rate decision on Thursday will be key market focus this week with traders keen to hear the latest views from the Bank

COT Indicators

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

LFOrder Flow Trader Bearish

gucot

 

USDJPY Outlook – Bullish

Recent JPY strength last week invited official comments with Japanese finance minister Aso warning of possible intervention in the market to weaken the currency.  Despite the Japanese finance minister warning on intervention, markets believed the central bank would not intervene to halt a rally ahead of a Group-of-Seven nations meeting next month where next steps by country are expected to be discussed with the Fed and ECB.

COT Indicators

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

LFOrder Flow Trader Bearish

ujcot

 

USDCHF Outlook – Bullish

With EUR having moved counter-intuitively higher in response to the latest ECB measures, it seems some pressure has likely been alleviated from the SNB who refrained from moving on rates at their recent meeting. Worth noting however that recently  SNB’s Jordan has warned 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. The latest CPI data for Switzerland showed that inflation grew 0.3% MoM as expected, adding support for the Swiss Franc.

COT Indicators

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

LFOrder Flow Trader Bearish

uchfcot

 

AUDUSD – Outlook Bullish

Higher commodities prices and a weaker US Dollar continue to support the Australian Dollar though traders remain cautious about the potential for RBA action if the currency continues to strengthen. Unemployment Rate data on Thursday provides the key domestic event risk for the week.

COT Indicators

  • Strength active buy signal, ticks up
  • Index active buy signal near highs
  • Momentum active buy signal tick up

LFOrder Flow Trader Bearish

aucot

 

USDCAD OutlookBullish

USDCAD plummeted below 1.3000 levels after better-than-expected employment data, which showed a sharp rise in March.  Apart from stronger employment figures, higher oil prices also helped boost the Canadian Dollar. The oil prices soared above 6% to two-week highs, amid renewed hopes for output freeze. BOC rate Decision comes into focus this week with the bank having recently surprised markets with an unexpectedly neutral tone at its last rate setting meeting.

COT Indicators

  • Strength signals goes flat, await new signal
  • Index active sell signal remains at lows
  • Momentum sell signal, ticks up

LFOrder Flow Trader Bullish

uccot