Weekly COT Report: Euro Bears Lighten Up

Trading Themes: USD mildly lower over last week. FOMC minutes revealed that for some members, lift-off was a close call with significant concern expressed for the Fed’s inflation target. NFPs came in at a strong 292k with the unemployment rate unchanged at 5%, however, disappointingly low average weekly earnings weighs on USD bulls as a lack of momentum in wage growth further hampers the US inflation outlook. Retail sales key data focus this week.

  • EUR: Quiet week on the data front, attention on Thursday’s ECB December meeting minutes for further clues on easing measures
  • GBP: Thursday’s BOE meeting and minutes the focus as markets take a read on BOE reaction to recent market developments                                                                                                  
  • JPY: Taking its lead from global risk sentiment, market has turned net long JPY first time since 2012
  • CHF: Overvalued domestic currency continues to weigh on beleaguered Swiss economy
  • CAD: Crude crash sends CAD to 12 year lows, commodity collapse and weak domestic data weighs
  • AUD: Weakest performing currency year to date 2016. China concerns weighing on growth expectations for the domestic economy

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, flat on the week
  • CHF neutral, flat on the week
  • JPY neutral, flat on the week
  • AUD bearish, decreased on the week
  • CAD bearish, flat on the week

EURUSD – Outlook Bearish

The single currency was driven higher last week as the cascade in Equity markets saw the currency supported as carry trades and hedges were unwound. EZ CPI came in below expectations, which amidst a heightening of global growth concerns, has seen expectations building for further action by the ECB. German GDP key domestic data focus this week.

COT Indicators

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

LFOrder Flow Trader Bearisheu1

GBPUSD – Outlook Bearish

The UK currency extended recent weakness weighed upon by a variety of factors; Brexit concerns, economic weakness, and diluted rate hike expectations. The latest UK Services PMI data printed below expectations, further weighing on UK rate hike expectations, whilst Trade Balance data showed a wider deficit than expected though a slight narrowing from the previous figure.  BOE rate decision key data focus this week with more Dovishness expected from the bank.

COT Indicators

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

LFOrder Flow Trader BearishGU1

USDJPY – Outlook Bullish

The Japanese Yen was a firm favourite over the week as global growth concerns stemming from further China data weakness and geopolitical tensions stemming from North Korea’s testing of a hydrogen bomb both weighed heavily on risk-sentiment fuelling strong demand for the safe-haven JPY. The safe-haven driven strength has however increased expectations that the BOJ will be forced to act to temper the moves

COT Indicators

  • Strength active buy signal, ticks down towards convergence
  • Index active sell signal, ticks down
  • Momentum active sell signal, ticks down

LFOrder Flow Trader Bearishuj1

USDCHF – Outlook Bullish

Swiss National Bank President Thomas Jordan said he can’t make a forecast whether the negative deposit rate will still be in force at the end of this year. Markets sense the CHF’s over valuation is weighing on growth and inflation, so traders are wary that the SNB could intervene in the FX market against CHF appreciation if necessary as such traders expect the CHF to remain one of the weakest performing G10 currencies in 2016.

COT Indicators

  • Strength active buy signal, ticks down
  • Index active sell signal, ticks down
  • Momentum active buy signal, ticks down towards convergence

LFOrder Flow Trader Bullishuchf1

AUDUSD – Outlook Bearish

The Australian Dollar suffered sharp losses last week in the wake of the dominant risk-off tone driven by Chinese data weakness and subsequent Yuan depreciation which weighed heavily on commodities and equities alike. Risk of further negative surprises from China keep’s the Aussie’s trading outlook pressured. Unemployment rate on Thursday is key domestic data focus.

COT Indicators

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

LFOrder Flow Trader BearishAU1

USDCAD OutlookBullish

The Canadian Dollar was driven lower last week as Oil picked up where they left off and began 2016 with a $6 slide. Despite the heavy weakness in Oil markets, price was able to stage a mild recovery as news that Saudi Arabia had attacked the Iranian embassy in Yemen caused supply concerns mid-week. The latest Canadian employment data showed that the Unemployment rate remained unchanged at 7.1% whilst the net-change in employment unexpectedly improved to 22.8k surpassing expectations of an 8k reading. An absence of key domestic data will leave CAD driven mostly by Oil & USD flows.

COT Indicators

  • Strength active buy signal, ticks up
  • Index active buy signal, ticks down
  • Momentum buy signal, ticks down towards convergence

LFOrder Flow Trader Bullishucad1