Weekly COT Report: JPY Buying Kicks Up A Gear

Trading Themes: The US Dollar softened slightly over the week driven by weak productivity numbers which printed -0.5% vs expectations of -0.4% marking the third consecutive quarterly decline, the first series of three straight declines in 37 years. The data suggests likely pressured on GDP and USD remained soft despite Hawkish comments from Fed President Williams saying a rate hike this year is still likely appropriate. Focus this week turns to CPI data for July which will give a crucial post-Brexit reading.

EUR: ECB minutes and EuroZone CPI in focus this week
GBP: Inflation, Earnings & Employment data on deck this week
JPY: Japanese 2Q GDP falls to 0.2% vs 0.7% expected and 0% vs 0.2% expected QoQ
CHF: Swiss Inflation remains in negative territory despite small uptick.
AUD: RBA minutes and Unemployment rate in focus this week.
CAD: Oil flows continue to drive the Canadian Dollar. Domestic data focus this week is CPI

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

EURUSD Outlook – Bearish

The single currency remained buoyant over the week taking its cue from a weaker US Dollar. A raft of EuroZone data on Friday highlighted unstable conditions with German 2Q GDP printing above expectations, at 0.4% vs 0.2$ QoQ and 1.8% vs 1.4% YoY, whilst Italian GDP fell to 0% vs 0.2% QoQ and 0.7% vs 0.8YoY. EuroZone Sentix Investor Confidence for August however came in strongly at 4.2 vs 3 expected. Focus this week will be on the ECB meeting minutes with traders looking for further colour following a surprisingly neutral meeting in July.

COT Indicators

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

LFOrder Flow Trader Bullish


GBPUSD Outlook – Bearish

Manufacturing Production for June came in weaker than expected at -0.3% YoY vs -0.2% expected whilst Industrial Production gained slightly in June, matching expectations. Over the second quarter, total production rose by 2.1%, confirming the out-turn of the GDP report last month, marking the biggest rise since the third quarter of 1999.  Production added 0.3 percentage points to total GDP growth of 0.6% in Q2. The standout data was the UK Visible Trade Balance which widened to $12.5bln in Q2 from £12bln in Q1, which could translate into weaker 2Q GDP. Alongside this, the total trade gap in May was revised significantly higher to £4.2bln from £2.2bln previous due to increased goods imports.  Total Trade Balance for June widened to £5.1bln, more than double the expected £2.25bln marking a 10-month low. Focus this week will be on earnings and employment data though still not for the post-Brexit period.

COT Indicators

  • Index sell signal consolidates
  • Strength sell signal ticks down
  • Momentum sell ticks down

LFOrder Flow Trader Bearish


USDJPY Outlook – Bullish

The Japanese Yen strengthened over the week as flows remain inbound in the wake of Brexit. Britain’s decision to leave the European Union may stymie a possible recovery in Japanese demand for steel, according to an official at the country’s top maker of the material. GDP data will be the domestic focus this week.

COT Indicators

  • Strength active sell signal down
  • Index signal turns flat, await new signal
  • Momentum buy signal ticks down

LFOrder Flow Trader Bearish


USDCHF Outlook – Bearish

USD weakness in the face of unwinding US rate hikes expectations have lent support to the Swiss Franc in recent sessions with price also boosted by safe-haven demand in the wake of increasing market volatility in the wake of the UK Brexit referendum. The SNB commented that they did infact intervene in the market to “stabilize the situation and will remain active in the market” to offset CHF buying. Domestic CPI was a little better than expected at -0.2% vs 0.3% though still holding in negative territory.

COT Indicators

  • Strength active buy signal ticks down
  • Index by signal ticks down
  • Momentum buy signal ticks up

LFOrder Flow Trader Bearish


AUDUSD – Outlook Bullish

The rally in risk assets earlier in the week drove AUD higher initially though prices fell back mid-week on weaker China data. Industrial Production data printed below expectations following on from weak Import data earlier in the week. Traders will now turn to the Unemployment rate this week.

COT Indicators

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

LFOrder Flow Trader Bullish


USDCAD OutlookBearish

The Canadian Dollar strengthened over the week deriving support from renewed upside in Oil and a weaker US Dollar. Domestic inflation data takes focus this week.

COT Indicators

  • Strength sell signal ticks down
  • Index active sell signal ticks up
  • Momentum signal turns flat

LFOrder Flow Trader Bearish