Weekly COT Report: Euro Bears Back In Business

Trading Themes: USD bulls finally got some affirmation last week as NFP and unemployment data added to weight to the case for a December lift-off. The Fed themselves have said that the decision for lift-off will not hinge on any single release but players are clearly taking this as an encouraging sign. Key data this week comes on Friday with retail sales and U. of Michigan consumer confidence

  • EUR: Positive Payroll pressure, policy divergence theme back in play
  • GBP: Reverses gains BOE dial down hawkish expectations, inflation risks to the downside                                                                                                   
  • JPY: Attention turns to Q3 GDP release as a potential catalyst for further BOJ action
  • CHF: SNB Leader Jordan reiterates stance to defend against CHF strength
  • CAD: Domestic employment data comes in better than expected but overshadowed by bumper US data
  • AUD: Under pressure driven by continued weak Chinese data and slump in gold prices

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

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

EURUSD – Outlook Bearish

The single currency was sharply lower last week following comments made by ECB’s Draghi that the ECB remain willing to act and have a range of options open to them, confirming that the ECB will reassess conditions in December with a view to increasing stimulus for the EuroZone economy noting that “external factors are creating downside risks to the outlook for growth and inflation.” Traders will turn to German CPI & EZ GDP as key data this week

COT Indicators

  • Strength active sell signal, ticks down
  • Index active sell signal, exit longs and enter short positions at Friday close or better
  • Momentum active buy signal, ticks down towards convergence

LFOrder Flow Trader Bearisheu1

GBPUSD – Outlook Bearish

Sterling was weaker following the release of 3Q GDP which undershot expectations of 2.4% to print 2.3%. Data weakness extended throughout last week with Mortgage Approvals dropping sharply alongside CBI reported sales, though the UK currency was able to recover higher levels due to USD weakness. Attention this week will be on the BOE’s “Super-Thursday” with traders keen to hear the BOE’s latest economic assessment following the Fed’s recent October statement which markets saw as increasing the likelihood of a December lift-off.

COT Indicators

  • Strength active sell signal, exit long positions and enter shorts at Friday close or better
  • Index active buy signal, ticks down
  • Momentum active buy signal, ticks down towards convergence

LFOrder Flow Trader BearishGU1

USDJPY – Outlook Bullish

The minutes from the Bank of Japan’s October 6th/7th meeting revealed that although members remain broadly upbeat about the domestic economy, concerns were growing over risks posed from China and emerging market economies. The Japanese yen was lower over the week as the US Dollar broke firmly to the upside. Trade balance data will be key domestic focus this week.

COT Indicators

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

LFOrder Flow Trader Bullishuj1

USDCHF – Outlook Bullish

USDCHF traded with a bid tone last week, due to the broad USD strength. The currency pair is slowly heading up while as participants are digesting SNB Chairman Jordan’s speech last Tuesday in regards to the overvalued Swiss franc and the extremely robust US jobs data

COT Indicators

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

LFOrder Flow Trader Bullishuchf1

AUDUSD – Outlook Bearish

Strength on the back of positive PMI data out of China was unwound last week with the Aussie trading lower as, despite keeping the headline interest rate unchanged, the RBA did leave the door open for further easing noting that “the outlook for inflation may afford scope for further easing of policy.” Traders will be closely watching key China data this week for any signs of further weakness in conditions there, likely to have a large impact on trading outlook for risk correlated pairs this week.

COT Indicators

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

LFOrder Flow Trader BearishAU1

USDCAD OutlookBullish

The Canadian Dollar was sharply lower over last week, mimicking the decline in Oil prices which retreated from the $48 per barrel mark mid-week. Canadian unemployment data on Friday showed an unexpected decline, printing 7.0% against expectations of 7.1%.Lack of key domestic data will leave the Loonie driven by USD and Oil flows.

COT Indicators

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

LFOrder Flow Trader Bullishucad1