Weekly COT Analysis

A week which had been centred around Fed dovishness rotated to ECB dovsihness as Mario Draghi once again unleashed his now trademark verbal easing upon the market.

Speculative accounts added to their net euro short positions, but trimmed
their net yen short positions as of Oct 7, according to U.S. CFTC data, released Friday. The CFTC’s COT report – non-commercial, futures-only section, excluding options – showed speculators had a net euro short position of -146,212 contracts as of Oct. 7, versus last week’s net short of -137,525 contracts. This compared to the -161,423 contracts seen Sept. 2, which was the largest net euro short since July 17, 2012 (-167,249 contracts).  A contract size over 100,000 contracts is generally viewed as extended. The record net euro short was -214,418 contracts, seen June 5, 2012. Spec accounts had a net yen short of -112,551 contracts as of Oct. 7, vs last week’s net yen short of -120,878 contracts. Last week’s net short was the largest net yen short since Jan 7, 2014 (-128,868 contracts). The record net yen short of -188,077 contracts was seen June 26, 2007. The euro closed at 1.2669 and USDJPY  at 108.03 on Oct. 7, compared to levels late Friday at $1.2611 and 107.77.

 

GBPUSD Outlook Neutral

GBP seems to be in the midst of a period of uncertainty as positioning evens out. With analysts beginning to differ around timescales for a BoE rate hike and the Fed registering a more dovishness tone, GBPUSD sees strength, momentum and net positioning indicators all around their midlines, though leveraged positioning has crossed to the downside for the first time this year, suggesting this next move is one through the NFP lows.

Having stayed short from Summer highs, analysis notes Net positioning evening out here with Momentum crossing to the upside, in light of this we are looking to set longs on a Daily close above this weeks high print. This is an aggressive trade, counter to dominant longer term positioning and so will be taken initially with lighter sizing with a view to increasing positioning on confirmed upside should price hold above last week’s high print where short stops are currently positioned.

GBPUSDDaily
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USDCHF Outlook Bullish
Market positioning is still convincingly long with Net positioning firmly to the upside. In addition to this, Non-commercial CHF positioning shows CHF longs to be at their lowest levels of 2014 suggesting clear upside for the pair.

We currently remain long in the pair by several positions from early June and continue to ride the Bullish trend. Although the momentum of non-commercial buyers has slowed significantly the overall positioning remains well intact and we would look to add to long positions on clear Bullish candlestick patterns noting the bullish pin bar at last weeks lows as early indication that upside is imminent in the pair.

USDCHFDaily

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USDCAD Outlook Bullish

The Loonie is consolidating at highs here and with Momentum cmoving higher in line with strength, our anticipation is for further USD upside. ​

With Net positioning moving higher from recent low levels and having crossed to the upside, we will add to long exposure on a break of last week’s high print, initially at a lighter size with a view to increasing sizing should price hold above last week’s high. Long term stops on bullish positioning currently sit below the October lows.

USDCADDaily
 
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EURUSD Outlook – Bearish

Having started positively this week, price tumbled on the back of Draghi’s Inflation-promising speech, with the Euro finding itself roughly 200 pips off this week’s highs. Though still off September’s record levels, short positioning was increased this week signalling further downside.

With Net positioning still orientated heavily to the downside, shorts remain intact with the NFP low as the current target amidst a longer term bearish overview. We will add to shorts on a Daily close below last week’s low print. Stops have been trailed down to sit just above last week’s high print.

EURUSDDaily
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AUDUSD Outlook Bearish

With Net-Positioning, Strength and Momentum indicators having crossed lower our short positions retain intact with an initial target of the NFP lows. The bearish Daily candlestick which marked YTD lows serves as further confirmation of downside and though price is currently consolidating at the highs of this bar we anticipate a breakdown in coming sessions and will add to shorts on a Daily close below last week’s low. Stops have been trailed down to sit above the Mid September 91 area high.

$AUDUSD (Daily)  20_05_2014 - 08_10_2014
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USDJPY Outlook Bullish

Although we saw price break recently consolidation lows, Net Positioning remains firmly bullish and longs established in June are supported by the recent bullish crossover in Momentum. A Daily close above the current highs will signal entry for further long positioning on a Daily close. Sizing will be at lighter speculative levels to begin with and will be increased should price hold above last week’s highs. Long term stop shave been trailed up to just below the 106.70s lows print before price pushed into recent highs.

USDJPYDaily
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