COT Weekly Analysis: USD Longs Pared, Lowest Levels Since 2014

  • CFTC data shows USD aggregated net long position decreased a further 3.3% to $41.1 Billion which represents the lowest levels since the end of 2014, last week’s testimony by FED Chair Yellen gave USD bulls little impetus to add to long positions as she gave no substantive clues as to the timing of the much anticipated policy move.
  • EUR net spec shorts continue to be pared short contracts totalled 177,736 or $25.2 Billion which represents a decrease of 4.8% with the Greek debt drama on the back burner the markets attention will shift back to the ECB and Thursdays press conference with President Draghi
  • JPY positioning decreased 3% to 47,512 contracts, the least net short JPY has been since November 2012.
  • GBP shorts continued to be cut on the week with $0.7bn of buying on the week ended Tuesday. This brought net shorts to -$2.1bn, the least net short GBP has been thus far in 2015
  • In the commodity FX pairs  AUD short positioning increased  to 63,154 or 17.5%, which brought AUD net short positioning to highest levels of the year while CAD shorts continued to increase, with $0.2bn of selling on the week .This brought positioning in CAD to -$2.9bn, the most net short CAD has been since early May 2014.

EURUSD OutlookBearish

Summary:  Another very contained week this week as the risk surrounding the situation in Greece has subsided somewhat this week with an agreement in the works to extend funding for several months. With that situation appearing under control for now, markets focus is turned once again to the ECB, with purchases set to begin in March and with the ECB meeting and press conference this week. There are some initial signs that the easing already seen as translated into growth but when compared with US growth and alongside the monetary policy differentials the EUR looks set to continue its downward path.

  • Strength active sell signal, continues consolidating at recent lows
  • Index active sell signal, continues to tick up from its early February lows
  • Momentum active buy signal, continues drifting higher form its bullish cross
  • Order Flow Trader bearish

2015-03-02 11_57_29-

2015-03-02 11_58_55-Reuters - currency futures positioning

GBPUSD Outlook –  Bearish

Summary:  Saw some strength last week before retreating back into mid-range on month-end flows. Over the near term the UK currency should see support from relative rate differentials between it and the Euro area bringing strength to GBP crosses. However over the medium term and especially against the USD the outlook is more negative with growing political risks threatening to reduce FDI (Foreign Direct Investment) inflows

  • Strength active sell signal, continues to tick up from January lows
  • Index active sell signal, registering highest readings year to date
  • Momentum active buy signal, pulls back from recent highs, bullish buy signal remains active
  • Order Flow Trader bearish

2015-03-02 12_03_04-

2015-03-02 12_03_57-Reuters - currency futures positioning

USDJPY Outlook – Bullish

Summary: With data supportive of a Fed move and a rebound in US yields attracting Japanese investor and importer community, JPY is likely to weaken from these levels. The anticipation of a Fed move is likely to pressure JPY over the medium-longer term as a funding currency and as such markets expect the USDJPY consolidation to unwind to the upside

  • Strength active buy signal, continues to tick down from January highs
  • Index active sell signal consolidates at lows at year to date lows
  • Momentum active sell signal down to test 2015 lows
  • Order Flow Trader bullish

2015-03-02 12_06_25-

2015-03-02 12_07_57-Reuters - currency futures positioning

USDCHF Outlook – Bearish

Summary:  The USDCHF has been on a steady drift higher and continues to retrace the seismic losses registered post the SNB announcement. USD data will likely be the key driver for this pair this week with the ECB eyed Thursday and US Non-Farm payrolls on Friday we are likely to see some end of week volatility in this pair

  • Strength active buy signal, ticking back down
  • Index sell signal active, retesting 2015 lows
  • Momentum sell signal active, continues to drift higher from 2015 lows
  • Order Flow Trader bullish

2015-03-02 12_10_56-

2015-03-02 12_12_02-Reuters - currency futures positioning

AUDUSD Outlook – Bearish

Summary: Still chopping around in its multi-week range currently, a period of consolidation in a longer term downtrend. Whilst the RBA might not necessarily cut again at the next meeting, soft growth and commodity sector investment suggest this would be a pause in the easing cycle rather than an end to it and with clear monetary policy differentials with the US, the downtrend is likely to continue.

  • Strength active sell signal, ticks back down to retest 2014 lows
  • Index active sell signal, ticking back down to 2014 lows
  • Momentum active sell signal, retesting 2014 lows
  • Order Flow Trader bearish

2015-03-02 12_15_53-

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

USDCAD Outlook – Bullsih

Summary: Although the BOC’s Poloz’s speech spurred rate cut expectations to be priced out of the Central Bank’s next meeting, the BOC will likely retain its dovish tone as oil markets remain volatile. Should oil prices stabilize, low prices still threaten Canadian growth and should weaken the currency.

  • Strength active buy signal, pulling back from 2015 highs
  • Index active buy signal, retests 2014 highs
  • Momentum active buy signal, retreats from 2014 highs
  • Order Flow Trader bearish

2015-03-02 12_24_32-

2015-03-02 12_25_19-Reuters - currency futures positioning