COT Weekly Analysis: USD Advances, EUR Shorts Scaled Back

  • CFTC data shows that Implied USD long positions remain at historical extremes and overall USD long positons continue to build, with USD bulls emboldened by strong payrolls data from the US which the market views as a further greenlight for FED to normalise monetary policy in the US later this year while most other central banks are either considering or implementing easing measures.
  • According to CFTC data, EUR remains the favourite funding currency while it is worth noting though that EUR shorts have been marginally scaled back from recent extremes. 
  • For the JPY, shorts have decreased from 59,571 last week to 55,124 which is now the lowest level of short holdings since July 2014. 
  • Traders increased their shorts in CAD with an increase from 27,321 last week to 33,333 this week. 
  • Traders slightly reduced their GBP shorts while adding to their CHF shorts.

EURUSD OutlookBearish

Summary:  Saw choppy price action this week amidst conflicting reports surrounding a resolution to the situation with Greece. The single currency headed higher from year to date lows on reports of Greece being given an extension of the emergency liquidity assistance. The ongoing uncertainty surrounding Greece and its position in the Eurozone is likely to continue to weigh on price over the coming weeks and with negotiations appearing far from smooth, price action is likely to remain choppy and reactive. All eyes will be on the EU summit Monday for the next instalment in the Greek saga.

  • COT Strength at lows, Index ticks up from recent lows and Momentum convergence resolves with a bullish signal.
  • Order Flow Trader bullish

2015-02-16 12_11_47-

 

 

2015-02-16 12_13_04-Reuters - currency futures positioning

GBPUSD Outlook –  Bearish

Summary:  Registered a positive week on the back of a hawkish quarterly inflation report and BoE Governor Carney’s subsequent comments. With the Inflation forecast raised, reserve manager inflows are likely to continue to strengthen the currency, which has now broken out of the downtrend running from 2014 highs. Weekend hawkish comments from BoE board member Weale will likely support cable as we head into the new week.

  • COT Strength continues to retreat from recent lows, Index also continues ticking up from recent lows and Momentum ticks back down.
  • Order Flow Trader bearish

2015-02-16 12_17_56-

 

 

2015-02-16 12_18_58-Reuters - currency futures positioning

USDJPY Outlook – Bullish

Summary: JPY saw a sharp rebound last week following unsourced comments that the BoJ is reluctant to expand monetary easing. This move was further fuelled by the disappointing US retail sales data. Markets await Comments from BoJ’s Kuroda this week with a denial of the reports likely to revive yen selling.

  • COT Strength continues to retreat from recent highs, the Index remains at depressed low levels and momentum has ticked up from last week’s lows.
  • Order Flow Trader bearish

2015-02-16 12_20_47-

 

2015-02-16 12_26_17-Reuters - currency futures positioning

 

 

USDCHF Outlook – Bearish

Summary:  Despite the SNB abandoning their official 1.20 EURCHF floor, reports of rumours that they are likely to intervene in the FX market to lean against CHF appreciation combined with the likelihood of further rate cuts market participants continue to expect CHF downside and have increased CHF shorts this week.

  • COT Strength ticks up from last week’s decline, Index and Momentum bearish crosses remain intact but both readings show an increase from last week’s lows
  • Order Flow Trader bullish

2015-02-16 12_43_15-

 

 

2015-02-16 12_44_22-Reuters - currency futures positioning

AUDUSD Outlook – Bearish

Another bearish week for the currency following the unexpected cutting of interest rates by the RBA. Weak data out of China added downside pressure as commodity prices fell but the pair managed to rebound somewhat on the back of disappointing US retail sales, the rebound continued on the back of a speech given by RBA governor Stevens who was found to sound less dovish than expected. RBA minutes will be eyed this week for further clues as to the RBA’s stance.

Summary:

  • COT Strength ticks back down to retest recent lows, Index ticks up from last weeks lows with Momentum also up from depressed low levels.
  • Order Flow Trader bullish

2015-02-16 12_46_51-

 

 

2015-02-16 12_47_27-Reuters - currency futures positioning

USDCAD Outlook – Bullsih

Summary: CAD had a choppy week on the back of volatility in crude prices. Disappointing US retail sales saw CAD regain some of the ground it conceded earlier last week but USD bullishness looks likely to continue from these levels. The BoC is likely to continue its dovish tone and with oil prices threatening Canadian growth, further CAD downside is expected to materialize

  • COT Strength registers new highs, Index retesting recent highs and Momentum pulls back from recent highs
  • Order Flow Trader bearish

2015-02-16 12_49_46-

 

 

2015-02-16 12_50_27-Reuters - currency futures positioning