COT Weekly Analysis: USD Longs Exceed January Highs

  • CFTC data shows shows that USD long positioning is registering new highs for the year and exceeding the mid-January highs. The stellar jobs data posted on Friday keeps the USD bull trend firmly intact, and with wage inflation improving traders will be re-pricing a FED move this year. While most other major central banks are either enacting or considering monetary easing moves, the policy divergence theme remains front and centre.
  • The market has increased its EUR short exposure for the seventh consecutive week with its highest reading since June 2012. Net shorts rose to 196,309 versus 184.745 the week before.
  • AUD data demonstrates that the short position is now the largest it has been in the past twelve months. The RBA’s rate cut will have encouraged bears to press positions, although the subsequent statement release suggested that there was little indication of a strong easing bias beyond last week’s rate cut.
  • JPY net shorts decreased to 59,571 the lowest levels since July of last year, with the USDJPY resolving its recent range to the upside the positioning adjustment suggesting there is scope for further upside ahead.

EURUSD OutlookBearish

Summary:  EUR was subject to whipsaw week last week, subjected to headline driven flows related to the new Greek government’s negotiations with the ECB members regarding its outstanding debt obligations and the terms of its refinancing deal with the Troika. Friday’s jobs data added to the Euro’s woes and saw the pair end the week under pressure, opening this week at lows of its recent range.

  • COT Strength making new lows, Index continues to consolidate at low levels and Momentum continues to converge threatening a bearish cross.
  • Order Flow Trader bullish

2015-02-09 12_27_16-

2015-02-09 12_28_30-Reuters - currency futures positioning

GBPUSD Outlook –  Bearish

Summary:  GBP continued to grind higher through much of last week. The BOE policy decision to keep rates and the current 375bn asset purchase programme on hold, and the accompanying statement that suggested the BOE remained on course to raise rates in the medium term, added support to the GBP with further support coming from a 2% rise in UK house prices in January. The USD reversal Friday saw cable sell off into the close and is making new lows this morning. All eyes will be on the Inflation Report this week with bears hoping for a hawkish interpretation and a sustained break of the key 1.50 level.

  • COT Strength continues to retreat from recent lows, Index also ticks up from recent lows and Momentum is starting to converge.
  • Order Flow Trader bullish

2015-02-09 12_32_50-

2015-02-09 12_33_45-Reuters - currency futures positioning

USDJPY Outlook – Bullish

Summary: The addition of Professor Yutaka Harada as the latest board member to the BOJ is viewed as a move which should strengthen and embolden Bank of Japan Governor Kuroda. It is envisaged that Professor Harada would be seen as supportive of Kuroda’s expansionary policies and this would open further likely hood of more policy moves to come. The JPY was one of the biggest victims of Friday’s USD reversal with flows chasing USD higher, with price now testing trend line resistance from last year’s high.

  • COT Strength continues to retreat from recent highs, the index and momentum bearish crosses continue to suggest less conviction in the bullish trend for now.
  • Order Flow Trader bullish

2015-02-09 12_36_51-

2015-02-09 12_38_09-Reuters - currency futures positioning

USDCHF Outlook – Bearish

Summary:  USDCHF continues to recover the large losses prompted by the SNB, with the market currently retesting the 50% retracement area from the highs to lows posted post-SNB peg removal. With very little in the way of data due this week, the CHF will likely trade around headline risk from Greek political developments.

  • COT Strength continues to pull back and is starting to converge, Index and Momentum bearish crosses remain intact with both indicators continuing to decline
  • Order Flow Trader bullish

2015-02-09 12_40_39-

2015-02-09 12_42_50-Reuters - currency futures positioning

AUDUSD Outlook – Bearish

Summary: After printing five year lows last week with the RBA cutting rates on Tuesday, the AUD had staged a significant recovery from the mid .76 area, this recovery was in tandem with an improvement in overall commodity prices. The AUD’s improving fortunes were further bolstered with the RBA policy statement overnight which suggested there was little indication of a strong easing bias beyond this week’s 25bp rate cut to 2.25%, however in line with most majors the AUD recovery has stalled and the downside looks vulnerable

  • COT Strength ticks back down to retest recent lows, Index is back at lows with Momentum just ticks up from recent lows
  • Order Flow Trader bearish

2015-02-09 12_45_19-

2015-02-09 12_46_18-Reuters - currency futures positioning

USDCAD Outlook – Bullsih

Summary: The CADs fortunes, which have been inextricably linked to the aggressive decline in crude oil, experienced a reprieve in the devastating 10% decline witnessed through January as crude appeared to be finding its legs this week so to did the CAD and as such the pair took a breather from its almost straight line advance of the past month. However at this stage the pull back still looks corrective and with markets continuing to price another move by the BOC this temporary set back looks like a decent opportunity to reposition for more upside in the weeks ahead.

  • COT Strength Index and Momentum reverse last week’s pull back and are now retesting their recent high levels
  • Order Flow Trader bearish

2015-02-09 12_48_27-

2015-02-09 12_49_26-Reuters - currency futures positioning