Weekly COT Report: JPY Game Of Chicken Continues

Trading Themes: Expectations of a Q1 rate-hike are even lower now following Fed Chair Yellen’s comments last week which cautioned the likelihood of global-developments (Oil, Markets, China) weighing on the US growth outlook. Data flow was mixed, with a drop in consumer confidence belying better than expected Jan Retail Sales data. Key data focus this week will be CPI and the Jan FOMC meeting minutes.

  • EUR: Traders pare long positions on fears of ECB jawboning
  • GBP: Weak Industrial and Manufacturing data, traders eye employment data next
  • JPY: Sharp pullback in risk sentiment see funds flow into JPY safe haven
  • CHF: SNB Head Jordan once again reiterates his belief that the CHF remains overvalued and doesn’t rule out lowering rates further
  • CAD: Crude flows to remain the key driver with Canadian markets closed today.
  • AUD: AUD finds its feet with sympathy bid from the uptick in gold

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

EURUSD – Outlook Bearish

Another sharp downturn in European equity markets, alongside USD weakness, saw EUR supported last week as the single currency’s inverse correlation with risk fuelled further buying. EuroZone 4Q GDP printed in line with expectations. As the Euro approaches 1.14 again investor expectations for ECB verbal intervention and indeed further action is growing. Traders will be paying close attention to the ECB meeting minutes.

COT Indicators

  • Strength active sell signal, ticks up
  • Index active buy signal, ticks up
  • Momentum active buy signal, enter long positions at Friday’s close or better

LFOrder Flow Trader BullishEUCOT

GBPUSD – Outlook Bearish

Sterling was flat last week, weighed upon by crumbling risk sentiment and weak domestic data yet supported by USD weakness. The latest Trade Balance data showed a narrowing of the deficit in Dec though Industrial & Manufacturing Production were both below expectations in Dec. The January NIESR GDP estimate was also below expectations. A raft of key domestic data hits the tape this week. Wage growth data and CPI will be headline events.

COT Indicators

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

LFOrder Flow Trader Bullishgucot

USDJPY – Outlook Bullish

A sharp deterioration in risk-appetite fuelled by a further decline in equity and commodity markets saw another strong surge of JPY buying last week despite the BOJ having recently introduced negative rates. Japanese officials commented on Friday that they are watching the currency markets and will “act accordingly” as the game of chicken between speculators and the BOJ continues.

COT Indicators

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

LFOrder Flow Trader Bearish ujcot

USDCHF – Outlook Bullish

USDCHF advanced to a high around 0.9791 Friday as the greenback was lifted by a solid US retail sales reading, which rose 0.2 percent in January versus the previous negative 0.1 percent, reviving the possibility of policy divergence between the Fed and other central banks. Swiss National Bank (SNB) Chairman Thomas Jordan reiterated that Swiss franc remained ‘overvalued’ and he did not rule out lowering interest rates further.

COT Indicators

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

LFOrder Flow Trader Bearishuchfcot

AUDUSD – Outlook Bearish

The steady decline in equity and commodity markets over last week weighed heavily on the Aussie though further downside was tempered by USD weakness over much of the week. Continued decline in Oil prices and intensifying global-growth concerns are fuelling investor expectations for further action from the RBA. Key domestic data focus this week comes from the Unemployment rate, which has been steadily decreasing recently. Traders will also be wary of risk posed by Chinese data this week with Trade Balance and CPI – any surprises here could fuel sharp volatility.

COT Indicators

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

LFOrder Flow Trader Bullishaucot

USDCAD OutlookBullish

Despite a fresh decline in Oil prices, which hit $25 per barrel last week, USDCAD remained hemmed in by an equally weak USD over much of the week. Elsewhere CAD was sharply sold as further Oil declines bolster investor expectations for further BOC action. Oil flows will continue to be a key driver especially with data risk from China this week. Domestic data focus is CPI on Friday.

COT Indicators

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

LFOrder Flow Trader Bullishucadcot