Weekly COT Report: Players Load Up On EUR & GBP shorts Ahead Of Brexit referendum

Trading Themes: The US Dollar remains under pressure ahead of the June FOMC meeting with the disappointingly low May Non-Farm Payrolls print causing a sharp downshift in US rate hike expectations. Fed Chair Yellen removed the reference to the “coming months” in her recent comments regarding the US rate path. Traders now await the June FOMC meeting with bulls hoping for a clear sign that July/August remain strong contenders

EUR: ECB remain on hold but keep dorr open for further action if warranted
GBP: Sterling pressured by growing support for the “Vote Leave” Brexit campaign.
JPY: BOJ in focus this week – traders expecting dovish talk following JPY strength
CHF: A lack of EUR downside keeps the pressure off the SNB for now.
AUD: AUD Unemployment rate in focus – recent data has been positive and RBA refrained from further rate cut
CAD: Oil strength keeps CAD supported

Let’s take a look at what the latest COT report data is showing us from a trend and net change week over a week perspective…

  • EUR bearish, increased on the week
  • GBP bearish, increased on the week
  • JPY bullish, increased on the week
  • CHF bullish, decreased on the week
  • AUD bullish, decreased on the week
  • CAD bullish, flat on the week

EURUSD Outlook – Bearish

ECB’s Nowotny said the environment of extremely low interest rates is not the norm, that inflation should be a lot better in 2017, and that he does not expect the oil price to weaken significantly again. Markets remain directionless about Euro due to the uncertainty stemming from the Brexit issue. On the data front, 1Q EuroZone GDP YoY was 1.7% after seasonal adjustments, better than the markets’ forecast 1.5%.

COT Indicators

  • Index active buy signal weakens
  • Strength active sell signal strengthens
  • Momentum sell signal ticks down

LFOrder Flow Trader Bearish


GBPUSD Outlook – Bearish

Despite having spiked over 180 pips higher in less than a minute on, reportedly due to a “fat finger” trade, Sterling sunk to a three-week low on Monday after two online surveys gave the “Leave” campaign a 4 percent lead. The Brexit storm continues to take priority over economic data which was much stronger than expected, with industrial production rising 2.0% m/m.

COT Indicators

  • Index buy signal given
  • Strength sell signal strengthens
  • Momentum sell signal given

LFOrder Flow Trader Bearish


USDJPY Outlook – Bullish

The Japanese Yen gained after mixed current account and GDP data which suggested the economy expanded at an expected growth pace, while the current account surplus came in narrower than expected. The government is asking lenders about the possibility of submitting tender offers with negative rates at the ministry’s short-term special accounts borrowing program auctions, according to people with direct knowledge of the matter said. BOJ come into focus this week with traders eager to hear the latest from the bank given recent JOY strength.

COT Indicators

  • Strength active sell signal, ticks down
  • Index active sell signal ticks up
  • Momentum buy signal

LFOrder Flow Trader Bullish


USDCHF Outlook – Bearish

With EUR having moved counter-intuitively higher in response to the latest ECB measures, it seems some pressure has likely been alleviated from the SNB who refrained from moving on rates at their recent meeting. Worth noting however that recently SNB’s Jordan has warned of a “nuclear” option in the event of continued CHF appreciation stating that the SNB can cut the exemption from negative deposit rates that it extended to most domestic banks’ reserves.

COT Indicators

  • Strength active buy signal ticks up
  • Index buy signal given
  • Momentum active buy signal ticks up

LFOrder Flow Trader Bullish


AUDUSD – Outlook Bullish

The Reserve Bank of Australia kept interest rates on hold at its Jun meeting and implied it was in no hurry to ease monetary policy further on signs of reasonably strong economic growth. The AUDUSD was the biggest gainer among major currencies, hitting its highest since 6 May. The RBA kept the cash rate at a record low 1.75%, after cutting last month for the first time in one year.

COT Indicators

  • Strength active sell signal ticks down
  • Index active sell signal ticks down
  • Momentum sell signal ticks down

LFOrder Flow Trader Bullish


USDCAD OutlookBullish

The Canadian Dollar strengthened to a one-month high against the USD after oil prices climbed above $50 a barrel. The loonie’s gains came after Federal Reserve Chair Janet Yellen on Monday called the latest US jobs numbers disappointing and didn’t repeat her recent message that rates could rise again in the coming months.

COT Indicators

  • Strength sell signal ticks up
  • Index active sell signal remains at lows
  • Momentum signal turns flat, await new signal

LFOrder Flow Trader Bearish