Weekly COT Report: JPY Bulls Won’t Back Down

Trading Themes: January FOMC minutes revealed a Dovish tone to the meeting, as expected, with the Fed citing a deteriorating economic environment since December with growing downside risks. The minutes were largely seen as confirming expectations that a March rate hike is off the table. January CPI was better than expected, holding unchanged against an expected -0.1% loss, with core inflation registering its biggest gain in over 4 years. Key data focus this week will be GDP & PCE data on Friday with PCE data a key inflation gauge used by the Fed.

  • EUR: Positive EU summit conclusion may provide some short term support
  • GBP: London Mayor weighs into Brexit debate, deflates GBP
  • JPY: Global risk sentiment continues to dictate direction
  • CHF: Over-valuation weighing on economic growth and inflation
  • CAD: Crude flows to remain the key driver near term
  • AUD: RBA Edwards would prefer an Aussie trading at .6500

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

EURUSD – Outlook Bearish

Euro was driven lower last week as equity markets surged higher on an improved risk-appetite. ECB January meeting minutes endorsed market expectations that further easing is likely to come in March. Expectations were fuelled further as the OECD slashed EuroZone 2016 growth outlook to 1.4% from 1.8% previous. Key domestic data focus this week is EuroZone CPI on Thursday with any weakness likely to further increase expectations for ECB easing.

COT Indicators

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

LFOrder Flow Trader BearishEUCOT

GBPUSD – Outlook Bearish

Sterling was heavily weighed upon last week by a set of weaker-than-expected January inflation figures, followed by an increase in Unemployment. The UK currency is also currently under pressure as “Brexit” concerns build with UK PM Cameron currently taking part in a “make or break” two-day summit to secure better terms for the UK’s membership of the EU. Markets are anticipating sharp GBP weakness if a UK exit from the EuroZone does occur. GBP has been hit heavy overnight on news London Mayor is to throw his weight behind a UK exit from the EU. Key data focus this week is 4Q GDP.

COT Indicators

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

LFOrder Flow Trader Bearishgucot

USDJPY – Outlook Bullish

Despite a recovery in risk appetite last week, the Japanese Yen was still bid continually throughout the week as speculators continue to play chicken with the BOJ. BPJ Governor Kuroda called for coordinated action by central banks to stabilize global markets, his comments come ahead of the G20 meeting which is due to take place later this month. Japanese CPI will be key data focus this week.

COT Indicators

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

LFOrder Flow Trader Bearishujcot

USDCHF – Outlook Bullish

The CHF’s overvaluation is weighing on growth and inflation, so the SNB will likely continue to intervene in the FX market to fight against CHF appreciation. The Swiss trade surplus printed at CHF3.51 billion in January, compared with an upwardly revised CHF2.59 billion registered in December.

COT Indicators

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

LFOrder Flow Trader Bullishuchfcot

AUDUSD – Outlook Bearish

Alongside resurgent US Dollar strength, the Australian Dollar found itself under pressure last week as the Unemployment rate unexpectedly ticked higher. Resilient labour conditions have been the backbone of the AUD bullish view over recent months, despite weakening inflation, and this development strikes a blow to the heart of this outlook. An absence of key domestic data will leave AUD driven by risk-sentiment and USD flows.

COT Indicators

  • Strength active sell signal, ticks up toward convergence
  • Index active buy signal, consolidates gains
  • Momentum active buy signal, ticks down

LFOrder Flow Trader Bearishaucot

USDCAD OutlookBullish

A recovery in Oil last week bolstered the Canadian Dollar which improved across the board, further supported by a set of stronger than expected January inflation figures, tempering expectations for further BOC easing. An absence of key domestic data will leave CAD driven by Oil and USD flows.

COT Indicators

  • Strength active buy signal, ticks down
  • Index active sell signal, bearish sell signal, enter short positions at Friday’s close or better
  • Momentum sell signal, ticks down

LFOrder Flow Trader Bullishucadcot