Weekly COT Analysis: USD Longs Reload Into The New Year

  • USD net long positioning increased 4.8% to $41.9 Billion
  • AUD net shorts increase 4.8% to $3.3 Billion
  • JPY net shorts increase 3.8% to $10.1 Billion
  • EUR net shorts increase 3.7% to $23.1 Billion

Investors grew slightly more bullish on the USD as 2014 drew to a close. More traders moved into USD positions on bets the greenback would strengthen in 2015. The net amount of investor cash betting the dollar would gain against rivals increased 4.8% to $41.9B in the week ended Dec. 30, according to CFTC data. Amid holiday-reduced flows, asset managers soured on the British pound, which saw net bearish bets grow by 33.2% and 27.1%, respectively. Next week, rising fears about the outcome of the election in Greece and growing conviction regarding the ECB’s desire to launch sovereign QE are likely to push more investors into the euro-bearish camp

EURUSD OutlookBearish

Summary: The EURUSD printed a nine year lows on Monday, doveish comments from ECB president on price stability hurt the euro he further commented that the ECB was ready to take bolder steps on expanding monetary stimulus early 2015, this coupled with Chancellor Merkel’s comments regarding the potential of a Greek exit from the Eurozone saw the Euro briefly take out 2010 lows in early Asian action. Eurozone manufacturing PMI at 50.6 in Dec, missed market expectation and the weak data keeps the pressure firmly on the ECB.

Strength continues to consolidate at lower levels, Index indicators remain bearish with the Momentum ticking up suggesting the potential for slower downside progress in the near term.

2015-01-06 10_21_32-

2015-01-06 10_30_29-Reuters - currency futures positioning

GBPUSD Outlook –  Bearish

Summary:  GBPUSD fell to two year low in Monday trading in sympathy with the EUR, this is a bad start to 2015 for sterling. Last weeks Manufacturing PMI disappointed the market at 52.5 vs 53.7 exp, the market has significantly wound back their expectations for the BOE’s rate hike to 2016 amid weak data and the political uncertainty of the looming general elections in the UK. BOE rate decision will be eyed this week along with Trade Balance data.

Strength indicator is ticking back down to retest recent extremes, Index also ticks down to retest recent low levels but Momentum has ticked up modestly.

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2015-01-06 10_41_18-Reuters - currency futures positioning

USDJPY Outlook – Bullish

Summary: USDJPY was relatively steady Monday, pulling back from recent highs as the market focus’s on the Euro. Dollar strength continues to be the key driver for now and brought the pair as high as 120.74 on Friday, if the market can push through Fridays highs the path seems clear for a retest of the seven-year high at 121.84, printed on 8 Dec 2014. Non farm payrolls due later this week will likely prove the catalyst for the next directional phase in the JPY

Strength remains bullish, Index also ticking back up and Momentum is also on the rise suggesting continuation of broad bullish trend ahead.

2015-01-06 11_06_09-

2015-01-06 10_46_23-Reuters - currency futures positioning

USDCHF Outlook – Bullish

Summary:  USD continues its relentless march higher, breaking out from its multi year basing pattern and trading above 1.00. The market looks set to continue its core theme from the back end of 2014 with a keen focus on the plain policy divergence that is apparent between the focus of the FED on the potential for normalising monetary policy, while the rest of the major central banks around the world either consider or continue to implement monetary easing measures. SNB’s Jordan reiterated yesterday the absolute necessity of the Swiss Franc cap.

Strength retreats from recent highs. Index remains steady consolidating at recent levels and Momentum remains negative warning of potential pause or corrective phase in upside advance.

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2015-01-06 10_54_03-Reuters - currency futures positioning

AUDUSD Outlook – Bearish

Summary:  AUDUSD touched five and a half year lows in Monday’s trade as the broad USD strength and spike down in Globex crude prices weighed heavily on the pair at the Asian open. Bounces in the AUD have been sold into since late 2014 a theme which looks set to continue in early 2015 as the RBA Governor would like to see a 0.75 handle and the AUD remains weighed upon by the negative effect of weak China data. China CPI data will be eyed this week.

Strength rolling back over, Index retesting recent lows, Momentum remains depressed consolidating at low levels

2015-01-06 10_57_02-

2015-01-06 10_57_59-Reuters - currency futures positioning

USDCAD Outlook – Bullsih

Summary:  The USDCAD stormed higher last week recording five and half year highs Monday, the continued weakness in crude prices coupled with the broad USD strength are weighing heavily on the CAD. Like other majors the CAD is suffering from a pull back in domestic data performance which only serves to highlight the attractiveness of the USD. With Crude on the back foot and domestic data softening it is fair to expect more upside to come in the USDCAD

Strength and Index tick back up and remain bullish, Momentum is consolidating at highs supportive of continuation in bullish trend and new year to date highs in price.

2015-01-06 11_02_18-

2015-01-06 11_04_52-Reuters - currency futures positioning