Weekly COT Analysis: USD Longs Trimmed For Fourth Week

  • CFTC data shows USD aggregated net long position decreased a further 0.4% to $41 Billion which represents the lowest levels since the end of 2014 and the fourth week of reduction in USD longs, traders pared their bullish USD bets on concerns over US growth slipping as Fed Chair Yellen underlined her cautious stance with respect to raising rates, however this data doesn’t take into account Fridays robust Non-Farm Payrolls data from the US.
  • EUR net spec shorts continue to be pared short contracts totalled 172,389 or $24.1 Billion which represents a decrease of 4.4% with the ECB commencing Bond buying programmes in European government debt markets this morning, Greek debt concerns likely re-emerge as the headline risk with Euro group meetings taking place today.
  • JPY short positioning increased 9.9% to 52,521 contracts
  • GBP shorts increased to 27,000, up from 22,000 the week before
  • AUD net short positioning retreats from highest levels of the year with a decrease 2.8% to 61,545 contracts

EURUSD OutlookBearish

Summary:  Continued its downward trajectory last week, with the ECB meeting passing mostly as expected. QE is set to begin this week and the ECB has clarified its willingness to buy negative yield bonds and its commitment to continuing purchases through September 2016. The ECB’s stated commitment to easing saw the single currency push through the important psychological figure of 1.10 only for the blockbuster NFP number to push price down even further into the 1.08s.

  • Strength active sell signal, ticks up from recent low depressed levels
  • Index active sell signal, continues to drift up from early February lows
  • Momentum active buy signal, continues ticking higher form its bullish cross
  • Order Flow trader bearish

2015-03-09 13_22_37-

2015-03-09 13_23_55-Reuters - currency futures positioning

GBPUSD Outlook –  Bearish

Summary:  After a five week run up off the lows, the UK currency saw a decline last week, falling more than 400 pips off the highs with the strong NFP print proving the final nail in the coffin for GBP. Data out of the UK remains robust and the BOE continues its relatively hawkish tone however, uncertainty in the lead up to the May elections weighs on the currency and attention to the Fed lift off leans heavily.

  • Strength active sell signal, pulls back from February highs
  • Index active sell signal, retreats from 2015 highs
  • Momentum active buy signal, ticks up from February consolidation
  • Order Flow trader bearish

2015-03-09 13_27_11-

2015-03-09 13_28_18-Reuters - currency futures positioning

USDJPY Outlook – Bullish

Summary: Recent improvements in data adds to signs of growth in Japan suggesting that the BOJ will not ease further this year even against the backdrop of global Central Bank action. However continued signs of strength out of the US are pushing any JPY positives to the side and a surging Nikkei is forcing increased exporter selling of JPY which is likely to continue through Japanese elections.

  • Strength active buy signal, ticks up from February retracement low
  • Index active sell signal, ticks up from 2015 lows
  • Momentum active sell signal, ticks up from 2015 lows
  • Order Flow trader bullish

2015-03-09 13_31_12-

2015-03-09 13_32_15-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 continues to be the key driver for this pair as it gains further positive traction on the back of the robust US employment data and the commencement of the ECB Bond buying program.

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

2015-03-09 13_34_31-

2015-03-09 13_35_26-Reuters - currency futures positioning

AUDUSD Outlook – Bearish

Summary: A choppy week for the Australian currency. The recent RBA meeting further easing was postponed but not cancelled. Policymakers maintain the view that a weaker AUD is needed to add stability to the economy. With a Fed lift off nearing and Chinese growth forecasts being revised lower, AUD is likely to weaken into mid-year. The AUD ended the week trading through the lows of the weekly range, failing against Dollar strength on the back of a strong NFP print.

  • Strength active sell signal, retesting 2014 lows
  • Index active sell signal, pullback from 2014 lows
  • Momentum active sell signal, consolidates at 2014 lows
  • Order Flow trader bearish

2015-03-09 13_38_42-

2015-03-09 13_39_41-Reuters - currency futures positioning

USDCAD Outlook – Bullsih

Summary:  After surprising markets with an unexpected cut and taking a March cut off the table. Thursday’s BOC meeting saw further hawkish surprises with the BOC shifting away from further easing citing an improvement in financial conditions adding that risks surrounding inflation are now more balanced. However, any CAD positives were upstaged into Friday on the strong NFP print.

  • Strength active buy signal, retesting 2015 highs
  • Index active buy signal, consolidates at 2014 highs
  • Momentum active buy signal, ticking back up
  • Order Flow trader bullish

2015-03-09 13_42_22-

2015-03-09 13_43_22-Reuters - currency futures positioning