Weekly COT Report: Pre- Brexit Positioning Release

Trading Themes: Two days of testimony be Fed Chair Janet Yellen did little to offer hope for the prospects of a US rate rise in the coming months. During her testimony to the Senate Banking Committee the Fed chair said that Brexit will pose significant risk to the US economy and global financial market stability. Amid uncertainties on global development, Yellen added that “cautious approach remains appropriate”. With Britain having voted to leave the EU, US rate hike expectations are now being unwound in line with these comments. Focus now turns to GDP and PCE data which the Fed uses as a key gauge for inflation.

EUR: Market awaiting ECB response in the wake of Brexit. EZ CPI in focus alongside ECB meeting minutes
GBP: Sterling under heavy pressure following decision to leave EU with continued downside forecast
JPY: Markets await BOJ response in the wake of Brexit and subsequent JPY buying
CHF: Safe haven demand driving Swiss Franc higher, SNB intervene to offset buying and say they will remain active
AUD: AUD pressured by heavy risk off in wake of Brexit
CAD: CAD weighed on by moves lower in Oil in response to Brexit. BOC rate cut expectations growing

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

EURUSD Outlook – Bearish

The Euro was under significant pressure from the UK’s decision to leave the EU which saw the single currency collapse lower against the US Dollar yet surge higher against Sterling. Markets now await response from the ECB who cautioned before the voting that they stood ready to cushion markets with liquidity in the event of Brexit.

COT Indicators

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

LFOrder Flow Trader Bullish

eucot

GBPUSD Outlook – Bearish

Sterling suffered its largest intraday loss since on record as massive declines ripped through the early hours of Friday morning as banks and hedge funds acted on the private exit poll data they collected. With the UK having voted to leave the EU, it remains to be seen what the medium and longer term consequences will be with most forecasting severe damage to the UK economy on capital outflow.

COT Indicators

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

LFOrder Flow Trader Bullish

gucot

USDJPY Outlook – Bullish

The Japanese Yen was dramatically higher this week, reversing its initial weakness, on news of the UK’s decision to depart the EU. As Asian markets went into tailspin on Friday, safe haven buying kicked in taking the Japanese Yen back through highs. Traders now await response from the Bank of Japan who will surely have to deal with this latest round of JPY strength.

COT Indicators

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

LFOrder Flow Trader Bearish

ujcot

USDCHF Outlook – Bearish

USD weakness in the face of unwinding US rate hikes expectations have lent support to the Swiss Franc in recent sessions with price also boosted by safe-haven demand in the wake of increasing market volatility in the wake of the UK Brexit referendum. The SNB commented that they did infact intervene in the market to “stabilize the situation and will remain active in the market” to offset CHF buying.

COT Indicators

  • Strength signal turns flat
  • Index sell signal ticks up
  • Momentum active buy signal consolidates

LFOrder Flow Trader Bullish

uchfcot

AUDUSD – Outlook Bullish

AUD tracked the moves in risk markets in response to the UK’s leaving of the EU which saw AUD sliding against all but the British Pound. Minutes of the Reserve Bank of Australia’s (RBA) 7 June meeting revealed the central bank considered the current policy setting as appropriate for promoting sustainable economic growth and returning inflation to target over time.

COT Indicators

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

LFOrder Flow Trader Bullish

aucot

USDCAD OutlookBullish

The Canadian Dollar weakened in response to the UK’s decision to leave the EU, mapping the moves seen in Oil prices which tumbled on the news. Traders are increasing their expectations of further Bank of Canada easing in coming meetings

COT Indicators

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

LFOrder Flow Trader Bullish

ucadcot