Weekly COT Report: Aussie Bulls Step It Up

Trading Themes: Shrugging off the Dovish tone of the January FOMC meeting minutes, the US Dollar is being supported by a spate of positive data with Core inflation rising at its fastest pace in over four years and 4Q 2015 GDP unexpectedly jumping 1%. Personal Consumption Expenditure data however, which the Fed use as a key gauge for inflation, was weaker than expected, keeping expectations mixed ahead of the March FOMC. Bulls will be focusing on this week’s Unemployment Rate & Non-Farm Payrolls data for further support following last month’s unexpectedly low number.

  • EUR: Inflation data keeps pressure on ECB for further easing
  • GBP:  Pound continues to be pounded on Brexit concerns                                                                                           
  • JPY: Global risk sentiment and safe haven flows dictate direction
  • CHF: PMI data eyed for confirmation of further economic slow down
  • CAD: Crude flows to remain the key driver near term
  • AUD: RBA likely to remain on hold Tuesday

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

EURUSD – Outlook Bearish

A recovery in equity markets over the week weighed on EUR which also came under pressure from a stronger US Dollar. A raft of weak EuroZone PMIs keeps expectations for further ECB easing supported ahead of their upcoming meeting. CPI miss this morning keeps Euro under pressure as we kick start the week.

COT Indicators

  • Strength active sell signal, ticks up
  • Index active buy signal, consolidates gains
  • Momentum active buy signal, continues to test convergence levels

LFOrder Flow Trader Bearish

EUCOT

GBPUSD – Outlook Bearish

Brexit concerns weighed heavily on Sterling over the week as Bank reports forecasted the likely damage to the UK economy from a “Brexit”, further fuelling investor uncertainty. 4Q GDP on Thursday managed to stem the losses with data printing in line with expectations. A raft of domestic PMI data sets will be domestic focus this week.

COT Indicators

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

LFOrder Flow Trader Bearish

gucot

USDJPY – Outlook Bullish

A recovery in risk-sentiment over the week, supported by strength in Oil and equity markets, saw the Japanese Yen weaken as safe-haven demand softened. Moves were further by comments from BOJ Governor Kuroda informing markets that there is scope for pushing Japanese rates deeper into negative territory. Key China data over the week could see JPY safe-haven demand kick in again if data is weak.

COT Indicators

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

LFOrder Flow Trader Bullish

ujcot

USDCHF – Outlook Bullish

The KOF leading growth indicator continues to suggest that growth may be losing some momentum. This will likely be confirmed by a slowdown in manufacturing PMI data (Tuesday) and only 0.1% y/y (0.2% q/q) growth in Q4 (Wednesday). The recent “safehaven” bid for CHF, in the context of increased European and global risks, will likely keep the SNB on guard, and we continue to expect FX interventions in an environment of any prolonged CHF strength.

COT Indicators

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

LFOrder Flow Trader Bearish

uchfcot

AUDUSD – Outlook Bullish

The Australian Dollar continued to strengthen over the week, supported by a more accommodative risk-appetite across markets, with sentiment buoyed by the moves in Oil. This strength was further compounded by unexpected strength in domestic 4Q Private Capital Expenditure which printed 0.8% against an expected -3%. RBA is not expected to cut rates further at this meeting though traders will be keen to hear the RBA’s latest economic assessment.

COT Indicators

  • Strength active buy signal, bullish signal from convergence
  • Index active buy signal, consolidates gains
  • Momentum active buy signal, ticks up

LFOrder Flow Trader Bearish

aucot

USDCAD OutlookBullish

Recent Oil strength has benefitted the Canadian Dollar greatly. News of a Saudi Arabia & Russia led deal to freeze output at current levels received backing from other Oil-producers, and though countered by news of record builds in US Crude Oil inventories, keeps hopes alive for a correction to the current over-supply in Oil markets. Oil strengthened further into the weekend driven by a technical rally as traders squared Brent positions ahead of next week’s expiry. US Crude Oil inventories will be eyed again this week having weighed on price the last two weeks

COT Indicators

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

LFOrder Flow Trader Bearish

ucadcot