Weekly COT Report: Sterling Bulls Increase Bets

Trading Themes: USD sharply higher in the wake of the extremely Dovish October ECB meeting. Market otherwise quiet ahead of the upcoming FOMC meeting though a rate hike is priced only with the slimmest of chances. Outside of the FOMC rate decision, data focus this week turns to Advance Goods, Consumer Confidence, GDP & PCE data though reactions may be muted in the wake of the rate decision.

  • EUR: Draghi paves the way for more easing in December, EUR breaks 1.10 overnight
  • GBP: GDP data on deck this week, a below consensus read will push rate expectations back further                                                                                                     
  • JPY: Testing upper end of the range ahead of much anticipated BOJ meeting
  • CHF: ECB move likely to apply pressure to the SNB to increase FX purchases
  • CAD: CAD weakening on expectation of huge infrastructure spend projects to be delivered by the new Liberal government
  • AUD: Market concerns regarding further RBA action to stem AUD strength

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

EURUSD – Outlook Bearish

It seems as though markets were taken aback by the heavily Dovish tone of the ECB meeting with EURUSD tanking by over 300 pips as retail markets bought increasingly into the decline. News that the ECB is once again considering negative interest rates has turned sentiment firmly bearish on the single currency. Traders will focus on EuroZone CPI released this week to see if the EuroZone has moved back into positive territory

COT Indicators

  • Strength active sell signal, continues to tick up
  • Index active buy signal, ticks up testing highs
  • Momentum active buy signal, ticks up to retest highs

LFOrder Flow Trader Bearish

EUCOT

GBPUSD – Outlook Bullish

Data flow was positive for Sterling this week as Public Sector Borrowing unexpectedly contracted to £8.6bln from £9.6bln and retail sales for September displayed a convincing beat of 5.9% vs 4.7% expected. Despite the positive data sets GBPUSD drifted lower over the week as the US Dollar strengthened. Following last month’s surprise beats in lending data, traders will look to see if momentum can be sustained this month or not. Attention to will be on GBP GDP on Tuesday

COT Indicators

  • Strength active buy signal, exit short positions and enter long positions at Friday’s close or better
  • Index active buy signal, ticks up
  • Momentum active buy signal, ticks up

LFOrder Flow Trader Bearishgucot

USDJPY – Outlook Bullish

Japanese manufacturing PMI’s for September were unexpectedly stronger at 52.5 vs 50.5 expected. Despite this better data, JPY traded lower over the week with investor expectations growing for further BOJ easing at their upcoming meeting on Friday. Ahead of the BOJ statement we also have JPY CPI.

COT Indicators

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

LFOrder Flow Trader Bullishujcot

USDCHF – Outlook Bullish

More policy accommodation by the ECB in the coming months will likely add pressure to the SNB and increase market speculation regarding further policy measures. Indeed we would expect the SNB to step up FX purchases should the recent EURCHF sell­off persist. More broadly, continue to expect a “wait and see” policy stance by the SNB in the coming months

COT Indicators

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

LFOrder Flow Trader Bullishuchfcot

AUDUSD – Outlook Bearish

A much quieter week for the Australian Dollar last week, as price remains range-bound at recent highs against the Dollar. Risk sentiment has been tentative this week with commodities remaining soft. An absence of domestic data saw price mainly driven by USD flows. Domestic data focus this week will be on CPI data Wednesday whilst traders will also keep an eye on the RBNZ rate decision on Wednesday night for any potential cross-flow impact on the Aussie’s trading outlook

COT Indicators

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

LFOrder Flow Trader Bearishaucot

USDCAD OutlookBullish

The Canadian Dollar was lower following the Bank of Canada’s downward revision to growth. Canadian CPI on Friday came in just below expectations at 1.00% leading the CAD lower into the week-end. Traders will now look ahead to Fridays GDP print.

COT Indicators

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

LFOrder Flow Trader Bullishucadcot