Weekly COT Report: AUD Bears Battle On

Trading Themes: Headline NFP release surprised to the downside with a 173K print vs 217K expected, although average weekly wages picked up pace to 0.3%m/m from previous 0.2%. Notwithstanding the drop in jobs added, the wage number ties in well with the recently released Beige Book which reported signs of tightening labour market in several districts, which added support to the potential for a September move by the FOMC and kept a bid under the USD

  • EUR with the ECB ready to do more this could add to the impetus to sell EUR on rallies, but the conflicting risk-off sentiment moves in equity markets supports the EUR so for now the pair is trapped by an ECB QE offer and a risk aversion bid
  • GBP weakened for a second consecutive week to a three month low amidst slightly weaker than expected data – manufacturing, services and construction PMI. The PMIs were only slightly weaker than expected as they remain in expansionary territories. Focus for the week will be the BOE meeting
  • JPY remains on the back foot, trading below the 120-handle as the sell-off in the equities market continues on concerns about global growth. In the near term the pair will remain faithful to how equity markets perform
  • CHF Swiss consumer prices fell 1.4% YoY, the steepest drop in 56 years, while prices were 0.2% MoM,the fall completes the tenth consecutive month of declines
  • CAD  Bank of Canada will meet on Wednesday but the central bank is widely expected keep target rate at 0.50%
  • AUD breaks the psychological .70 level as the pair continues to be hammered by China and global growth concerns.

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

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

EURUSD – Outlook Bearish

The announcement of an increase in the ECB’s asset purchase program and willingness to step in against continued EUR strength saw price decline sharply against a continued backdrop of carry trade unwinding last week. GDP on Tuesday will be closely watched given the ECB’s latest announcement and will set the tone for the EUR’s trading outlook this week.

COT Indicators

  • Strength active sell signal, ticks down from last weeks high
  • Index active buy signal, at 2015 highs
  • Momentum active buy signal, ticks down

LFOrder Flow Trader Bearish

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GBPUSD – Outlook Bearish

Sterling traded lower last week as weak August PMI figures softened trader’s expectations of a UK rate hike and saw further retracement of bullish positions. BOE this week is now main focus though expectations have softened given recent data disappointment. GBPUSD has fallen through the 50% retracement of 2015 lows to highs and next key support is at 1.5086, the 61.8% retracement and May low.

COT Indicators

  • Strength active sell signal, exit long positions and enter short positions at Friday’s close or better
  • Index active buy signal, retreats from 2015 highs
  • Momentum active buy signal, ticks down

LFOrder Flow Trader Bearish

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USDJPY – Outlook Bullish

Safe haven flow has continued to support the Japanese currency amidst increasing global slow-down fears. Domestic data flow has had little impact against the broader issue of the timing of a Fed lift-off date and Chinese data concerns. Comments made by BOJ’s Kiucki that the BOJ will be unable to meet its inflation target and should taper it’s asset purchases seemed largely ignored by markets. No key US or domestic data should leave JPY trading off risk-based flows.

COT Indicators

  • Strength active buy signal, continues to tick down towards convergence level
  • Index active sell signal, continues to tick down from bearish convergence cross
  • Momentum active sell signal, exit long positions and enter short positions at Friday’s close or better

LFOrder Flow Trader Bearish 

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USDCHF – Outlook Bullish

Switzerland KOF indicator showed a rise to 100.7 points in August from a revised 100.4 in July, which is the first month to exceed its long-term 100-point average in the past year. The dollar sagged against the safe-haven currency, Swiss Franc, on poor Chinese manufacturing data, aggravating the recent worries about world growth and ignited the sell-offs in equities markets. The Swiss National Bank Chairman said its current policies are geared towards weakening the “significantly overvalued” Swiss Franc to support the Switzerland’s economy

COT Indicators

  • Strength active buy signal, ticks down from recent highs
  • Index active buy signal, retreats from recent highs
  • Momentum active buy signal, ticks down from 2015 highs

LFOrder Flow Trader Bullish

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AUDUSD – Outlook Bearish

Last week was a heavy week for the Australian currency which broke fresh 2015 lows having recently broken down through the 15 year ascending trend line. Australian Q2 GDP came in below market expectations at 0.2% q/q. and retail sales also fell below expectations printing the first lower figure in 14 months. The RBA maintained rates this month and stuck to a data-dependent policy stance believing current policy to be accommodative enough for now.  Unemployment rate on Thursday will be a key glimpse into the shape of the Australian economy and a bad print here could see further frontrunning by those expecting another RBA cut.

COT Indicators

  • Strength active sell signal, ticks up from recent lows
  • Index active sell signal, ticks up from recent lows
  • Momentum active buy signal, ticks up

LFOrder Flow Trader Bearish

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USDCAD Outlook – Bullish

The Canadian currency was weaker again last week despite the stronger-than-expected Canadian Q2 GDP data, the core drivers of risk sentiment and oil prices continued to keep CAD hemmed in with the Canadian unemployment rate increasing adding further concern for the state of the Canadian economy. BOC rate decision on Wednesday presents a key risk event with the BOC’s last rate decision statement leaving plenty of scope for further easing

COT Indicators

  • Strength active buy signal, continues  retreat from recent highs
  • Index active  buy signal, continues retreat from recent highs
  • Momentum sell signal,continues to tick down confirming bearish cross signal

LFOrder Flow Trader Bullish

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