Weekly COT Report: JPY Bulls Back Off

Trading Themes: The Fed’s Lockhart took to the wires commenting that he feels two rate hikes are still possible this year, extending Hawkish sentiments in the wake of the bumper June employment reports. On the data front we saw a mixed deck with a big jump in Retail Sales over June, which printed 0.6% vs 0.1% expected, followed by a small beat in Core CPI over the same period and a small miss on headline CPI. Finally, University of Michigan confidence printed well beneath expectations at 89.5 vs 93. 5 In the absence of any tier one domestic data USD likely to be driven by EUR flows in response to ECB.

EUR: ECB in focus, traders anticipating signals for further easing to come
GBP: BOE kept rates on hold though gave a strong signal for August easing. Employment & earnings data in focus this week.
JPY: Markets heavily expectant of further easing to be announced at July 29th BOJ meeting.
CHF: Rally in risk sentiment sees Swiss Franc safe haven demand diminished amidst global easing hopes
AUD: RBA meeting minutes in focus with traders looking for clues as to likelihood of further RBA easing
CAD: BOC keep rates on hold though growth forecasts cut. CPI in focus this week.

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

EURUSD Outlook – Bearish

A quiet data week for the Euro which moved mainly in response to the BOE decision. Expectations are growing ahead of the ECB meeting this week with market expecting the ECB to at least signal further easing with deflationary risk having increased in the wake of Brexit. Possible options to be considered are a further reduction of currently negative interest rates alongside an expansion of the bank’s QE program.

COT Indicators

  • Index sell signal given
  • Strength active sell signal ticks down
  • Momentum sell signal ticks down

LFOrder Flow Trader Bullish

eucot

GBPUSD Outlook – Bearish

Sterling soared over the week as profit taking emerged amidst thin liquidity with moves then deriving further support from the July BOE meeting which saw the bank opting to keep rates on hold. The bank did however give a firm signal of their intent to easy policy in August at which point they will conduct a “detailed analysis” of all available policy options.  Economic activity was cited as having weakened in the wake of Brexit and expected to weaken further though inflation was expected to rise as a result of the weakened GBP. Focus this week will be on the UK employment and earnings reports.

COT Indicators

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

LFOrder Flow Trader Bullish

gucot

USDJPY Outlook – Bullish

The election of Japanese PM Abe to the Upper House has boosted market expectations for further easing. Shortly after his victory the returning PM announced that he has ordered further easing with full details of the stimulus package to be completed by the end of July. Market attention now shifts to the BOJ’s July 29th meeting with speculation rife as to the scale and method of easing. However, according to a key adviser to the PM Japan should not resort to “helicopter money,” which would see the central bank directly underwriting public debt because that could stoke runaway inflation

COT Indicators

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

LFOrder Flow Trader Bullish

ujcot

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. June CPI held steady at -0.4% against expectations of -0.5%.

COT Indicators

  • Strength buy signal given
  • Index sell signal ticks up
  • Momentum active s signal consolidates

LFOrder Flow Trader Bullish

uchcot

AUDUSD – Outlook Bullish

Australia’s unemployment rate edged 0.1% higher to 5.8% in June, reflecting the surge in labour participation force (64.9% vs May: 64.8%). Job market remained solid with the total number of people gaining employment rising by 7900 last month, according to the Australian Bureau of Statistics. Chinese data this week added support to the Antipodean currency with Chinese GDP and Industrial Production both beating expectations, boosting risk sentiment. Focus this week will be on the release of the RBA July meeting minutes with traders looking for more colour on the likelihood of further RBA easing.

COT Indicators

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

LFOrder Flow Trader Bearish

aucot

USDCAD OutlookBullish

Bank of Canada decided to keep the policy rate unchanged at 0.5% as widely expected but cut its growth forecast for 2016. BoC stayed optimistic despite it cut the growth forecast. The Canadian 2016 GDP forecast was trimmed to 1.3% from 1.7%, saying that it expected a bounce back in the third quarter and beyond. The Canadian Dollar derived further support from the rally in risk assets across the week as higher Oil prices buoyed the currency which rose to a nine – day high against the US Dollar. Focus this week will be on domestic CPI on Friday

COT Indicators

  • Strength sell signal ticks up
  • Index active sell signal ticks up
  • Momentum buy signal given

LFOrder Flow Trader Bullish

ucadcot