Weekly COT Report: GBP Positioning Flips Net Bearish Once More

Trading Themes:

Dollar traded sharply lower following the disappointing NFP data which saw a swift move by markets to begin pricing out a December lift-off with focus now turning toward a March 2016 date. CME Fed Watch now shows only a 25% probability of a lift off in December. However, losses were reversed into the close as USD was strongly bid. Key focus this week will be on the September FOMC minutes release though the relevance of comments is questionable now given the very poor September jobs report that has been released since that FOMC meeting.

• EUR: ECB meeting minutes will be the key headline risk this week
• GBP: BOE decision closely eyed this week, traders paring bets that the BOE will move this year
• JPY: Traders monitoring the BOJ meeting for signs of further QE later this month
• CHF: Whipsawed Friday in post NFP price action. Swiss retail sales disappointed last week
• CAD: Sharp reversal from 11 year highs as Commodities reverse.
• AUD: RBA on watch this week.

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

EURUSD – Outlook Bearish

The Euro was sharply higher following the NFP as risk sentiment saw the Euro supported via its inverse risk correlation as equity markets fell into the NY open, however gains were quickly reversed over the American session on Friday. Inflation data midweek showed the EuroZone had dipped into deflation printing -0.1% in September, with German CPI similarly showing a -0.2% reading, leading players to anticipate further ECB easing in the coming months.

COT Indicators

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

LFOrder Flow Trader Bullish

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GBPUSD – Outlook Bearish

Weaker PMI data saw GBP trading lower over the week, shrugging off encouragement from better lending and mortgage approvals data. The post NFP USD weakness saw GBP trade back up into 1.52 before stalling and reversing, Growth concerns are now plaguing the UK economy once more with investors pushing out expectations of a UK rate hike. Attention will be fixed on the BOE on Thursday which is expected to see the Central Bank striking a Dovish tone.

COT Indicators

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

LFOrder Flow Trader Bearish

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USDJPY – Outlook Bullish

USDJPY finally broke out of the triangular range it has held since August 24th only to reverse and close back inside the range. No September rate hike from the Fed and a very weak September Jobs report is increasing pressure on the BOJ to increase stimulus.

COT Indicators

  • Strength active buy signal, ticks up
  • Index active sell signal, consolidates at last week’s low
  • Momentum active buy signal, ticks down

LFOrder Flow Trader Bearish

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USDCHF – Outlook Bullish

Swiss Retail Sales in August (Year over Year) dropped from 0.1% to -0.3%.Swiss KOF economic research institute raised Swiss GDP forecast to 0.9% this year and 1.4% in 2016. The SNB continue to monitor CHF markets to guard against erratic CHF appreciation

COT Indicators

  • Strength active buy signal, continues to tick up
  • Index active buy signal, ticks up from bullish convergence
  • Momentum active buy signal, ticks up

LFOrder Flow Trader Bearish

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AUDUSD – Outlook Bearish

The Aussie had recovered some ground in the week as risk sentiment improved following better Chinese data early in the week. Pressure is mounting on the RBA to ease further in the absence of a US rate hike and with expectations pushed further out following Friday’s weak NFP data. The RBA rate decision this week is expected to see the RBA on hold with risks skewed towards a further rate reduction.

COT Indicators

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

LFOrder Flow Trader Bullish

AU1

USDCAD OutlookBullish

The Canadian Dollar was stronger this week due in part to better domestic data by way of consensus GDP data and a slight rebound in oil prices. A stabilization in Chinese data this week also saw commodities firmer. Traders will turn their attention to the domestic unemployment rate on Friday where a positive print will encourage a stronger trading outlook for the Canadian Dollar.
COT Indicators

  • Strength active buy signal, ticks up
  • Index active buy signal, continues to tick up
  • Momentum sell signal, ticks up to test convergence

LFOrder Flow Trader  Bearish

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