Weekly COT Analysis: USD Longs Approach Record Levels

  • CFTC data showed USD aggregated net long position increased 6.4% to $43.6 Billion breaking a four week trend of declines in the net aggregated long USD positioning, the net long bets on the USD are now nearing record levels ahead of this week’s FOMC as traders are betting that the ‘patience’ term will be dropped from the statement green lighting a FED rate raise this year.
  • EUR net spec shorts increased to 181,073 or $24.2 Billion which represents a decrease of 0.6% with the ECB commencing Bond buying programmes in European government debt markets last week and weekend reports of grievances between Greek and German finance ministers  re-emerging in press headlines.
  • JPY short positioning increased 11.8% to 59,387 contracts ahead of this week’s BOJ meeting.
  • AUD net short positioning increased 21.8% to 76,851 contracts.

EURUSD OutlookBearish

Summary:  Traded steadily lower last week with the ECB’s QE program sending core and periphery bonds lower and so taking the single currency with them. The break of 1.10 last week has seen the Euro racing towards parity, however, weaker US retail sales granted some reprieve to EUR which managed to claw its way back above 1.05. Leveraged players and US corporates have been sellers last week, though in lighter size and with the FOMC meeting this week, flows are likely to return in favour of more downside as long USD exposure is sought.

  • Strength active sell signal, continues to drift up from 2015 lows
  • Index active sell signal, retesting February lows
  • Momentum active buy signal, starting to converge
  • Order Flow Trader bearish

2015-03-16 12_24_07-

2015-03-16 12_25_09-Reuters - currency futures positioning

GBPUSD Outlook –  Bearish

Summary:  With the BOE having recently revised down their 2015 inflation outlook we have seen another aggressive down week for GBP which plummeted down through 2013 lows. UK Data has disappointed and with political risks looming in the run up to the election in May, the UK currency is likely to remain pressured. Added to domestic uncertainty, the USD rally looks set to continue victimising GBP into this week’s FOMC meeting with anticipation of hawkishness

  • Strength active sell signal, ticks back up to retest February highs
  • Index active sell signal, ticking back down
  • Momentum active sell signal, bearish cross
  • Order Flow Trader bearish

2015-03-16 12_28_26-

2015-03-16 12_28_43-Reuters - currency futures positioning

USDJPY Outlook – Bullish

Summary: A congested and direction-less week for JPY having conceded it’s gains on the crosses and remained tightly bound against the Dollar. The Japanese economy is signalling early signs of reflation which would likely limit further BOJ action. The Nikkei closed over 19,000 for the first time since April 2000 and demand at these levels is still strong. With the increasing need to maintain hedging ratios as Japanese stocks soar, USDJPY is likely to remain supported.

  • Strength active buy signal, continues ticking up from February lows
  • Index active sell signal, continues to tick up from 2015 lows
  • Momentum active sell signal, ticks up from 2015 lows
  • Order Flow Trader

2015-03-16 12_32_59-

2015-03-16 12_33_14-Reuters - currency futures positioning

USDCHF Outlook – Bearish

Summary:  The USDCHF is attempting to retest the levels from which it broke sharply lower in January after the removal of the EURCHF peg by the SNB. The SNB once again take centre stage this week with their policy meeting scheduled for Thursday, markets don’t anticipate any further easing measures to be announced, although easing is anticipated from subsequent meetings with the potential for further FX intervention also market consensus

  • Strength active buy signal, ticking back up to 4 week highs
  • Index sell signal active, continues ticking up from 2015 lows
  • Momentum sell signal active, continues to grind higher
  • Order Flow Trader bullish

2015-03-16 12_38_33-

2015-03-16 12_36_42-Reuters - currency futures positioning

AUDUSD Outlook – Bearish

Summary: .Having continued its losing streak and broken year to date lows against the Dollar, the AUD saw a quick bounce on the back of weaker US retail sales. If there is to be a pullback in this USD rally then high-beta currencies such as AUD would be obvious beneficiaries. RBA minutes will be of key importance and any dovishness will see AUD resume it’s downward trading trajectory.

  • Strength active sell signal, new signal lows
  • Index active sell signal, testing 2014 lows
  • Momentum active sell signal, retreats from 2014 lows
  • Order Flow Trader bearish

2015-03-16 12_42_13-

2015-03-16 12_42_32-Reuters - currency futures positioning

USDCAD Outlook – Bullsih

Summary:  Another negative week for the Canadian currency, especially so against the Dollar which rose to it’s highest levels against the currency since 2008. The BOC appear more Hawkish in having recently taken any near-term rate cuts off the table however there is definite room for further CAD downside to improve the country’s competitiveness.

  • Strength active buy signal, consolidates at 2015 highs
  • Index active buy signal, retreats from 2014 highs
  • Momentum active buy signal, consolidates in upper range
  • Order Flow Trader bullish

2015-03-16 12_46_14-

2015-03-16 12_46_34-Reuters - currency futures positioning