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martedì 8 novembre 2016

Weekly CFTC COT Forex Positioning: Net Greenback Longs Continue to Increase

Lemme break down the latest numbers for y’all:

EUR – The euro was pushed deeper into bearish territory, thanks to the unwinding of 16,438 long contracts on the euro, which was partially offset by the 2,909 reduction in euro shorts. The increase in net bearish bets on the euro through the unwinding of euro longs was likely due to euro bulls still reeling from Draghi’s October 25 testimony, wherein he said that: “we remain committed to preserving the very substantial degree of monetary accommodation which is necessary to secure a sustained convergence of inflation towards levels below, but close to, 2% over the medium term.” Other than that, the prevalence of risk appetite during the week ending on November 1 was likely a factor as well, although risk aversion did make a comeback on November 1 itself.
GBP – Large speculators reduced their net bearish bias on the pound for the fourth week in a row. And they did this mainly by paring bearish pound bets by 863 contracts while slightly increasing long bets by 138 contracts. The weaker bearish bias on the pound was likely because of speculation that the BOE won’t be cutting further during the November 3 BOE Statement (we now know the BOE stood pat) after BOE Governor Carney’s testimony, which was hawkish overall, and the better-than-expected reading for the U.K.’s Q3 GDP was released (+0.5% vs. +0.3% expected, 0.7% previous). It also likely helped that uncertainty on the U.K. and the pound was a reduced a bit when Carney announced that he will be staying with the BOE until June 2019. Finally, it’s possible that speculators were betting that the High Court would rule against Theresa May’s government over the government’s authority to trigger Article 50 of the TEU in order to start the process for an actual Brexit. Of course, we now know that the High Court did indeed rule against the government, which sent the pound soaring higher.
Net bullish bets on the Greenback increased for the sixth week running, with the value of net long bets on the the Greenback rising from $18.81 billion to $20.78 billion, according to calculations done by Reuters. This is the largest net long position on the Greenback since January of this year. And the latestCommitments of Traders forex positioning report from the CFTC reveals that demand for the Greenback was more broad-based, since the Greenback only lost ground to the Aussie and the pound.
Oh, please keep in mind that the numbers below show the net positioning of non-commercial forex traders against the U.S. dollar. If you’re feeling overwhelmed by all these figures, you might need to review our School of Pipsology lesson on How to Gauge Market Sentiment Using the COT Report in order to learn how to pinpoint potential forex market reversals.
CFTC COT Forex Positioning (Nov. 1, 2016)

JPY – Bullish bets on the Japanese yen got pared, thanks mainly to the 1,375 reduction in yen longs and a very small 60-contract increase in yen shorts. As I mentioned earlier, risk appetite was the dominant market sentiment during the week ending on November 1, which is likely why yen bulls abandoned the safe-haven yen.
CHF – The Swissy dug even deeper into the red for the fourth consecutive week. The net absolute change in positioning during the week ending on November 1 was not very substantial. However, a closer look at positioning activity shows that 4,814 short contracts were trimmed. Although more long bets were cut down, with long bets on the Swissy falling by 6,084 contracts. As to why more longs were bailing out than shorts, that was probably due to the prevalence of risk appetite. After all, the Swissy is also a safe-haven currency.
AUD – The Aussie advanced against the Greenback for the sixth consecutive week. Net bullish bets on the Aussie increased thanks mainly to the reduction of 6,556 short contracts on the Aussie. Although the 2,388 increase in Aussie longs also helped. The stronger net bullish bias on the Aussie was likely because of the RBA’s November 1 decision to maintain its current monetary policy while hinting that it was in no hurry to cut further.
NZD – Similar to the previous week, the net absolute change in positioning on the Kiwi was very small, but enough to nudge the Kiwi deeper into bearish territory. Positioning activity was also rather limited, with Kiwi longs falling by 947 contracts and Kiwi shorts falling by 402 contracts. The COT report probably does not yet fully reflect the impact of New Zealand’s better-than-expected Q3 jobs report, which sent the Kiwi higher.
CAD – Non-commercial forex traders became more bearish on the Loonie, but positioning activity shows that Loonie longs increased by 2,449 contracts. It just so happens that the 5,085 increase in Loonie shorts was able to overwhelm the increase in Loonie longs. The larger increase in Loonie shorts was likely prompted by growing doubts over OPEC’s ability to implement its proposed oil production cut, as well as speculation that U.S. oil inventories were going to show a build-up, either due to faltering demand or higher supply.
Got any other conclusions you can draw from this latest COT Report? Feel free to share your thoughts in the comments section or if you’re looking for further discussion, community member ForExchange has a lively thread calledTrading based on Market Sentiment in the forums awaiting your participation.

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