FX COT Update: Commodity Currency Unwind Begins

Posted on
Currency Exchange Sign

This data references the week ending Tuesday, September 6th.

EURUSD

Non-Commercials increased their net short positions in the Euro last week selling a further 11k contracts to take the total position to SHORT 93k contracts. This latest build in Euro short positions came ahead of the September ECB meeting where many analysts were forecasting that the ECB would further adjust policy with some looking for an extension to QE and some looking for a rate cut. However, markets were left disappointed as the central bank refrained from easing policy. Whilst the accompanying statement and press conference were broadly Dovish, EUR was supported by comments that the ECB did not discuss extending QE. Despite the ECB reiterating that they stand willing and ready to act if needed, Investors unwound ECB easing expectations in response to the meeting. Finally, the ECB revised higher their 2016 growth forecast whilst lowering their forecasts for 2017 and 2018.

GBPUSD

Non-Commercials reduced their net short positions in Sterling last week, buying 3k contracts to take the total position to SHORT 90k contracts. This continued reduction in short positioning reflects weakening expectations for further BOE easing as UK data continues to defy initial bearish forecasts made during Brexit. Traders await the BOE this week though there now appears to be a disconnect between the bank’s guidance at their last meeting, where they noted that they expected to cut rates again in the near term, and recent data which has shown resilience in key areas such as inflation and manufacturing. Alongside the central bank meeting this week we also have UK earnings and employment data which will give further insight into economic conditions post-Brexit.

USDJPY

Non-Commercials reduced their net long positions in the Japanese Yen last week selling 9k contracts to take the total position to LONG 54k contracts. This reduction in JPY longs reflects the choppy positioning environment which has held markets hostage over recent months as US rate hike expectations fluctuate alongside BOJ easing expectations, which have ultimately proved futile in delivering a weaker JPY rate. The current risk-off mood now lends itself to a resumption of JPY buying. Traders now await the September MPM meeting at the end of the month for the latest guidance from the BOJ.

USDCHF

Non-Commercials reduced their net long positions in the Swiss Franc last week selling 7k contracts to take the total position to LONG 1k contracts. This reduction in long positioning again highlights the current indecision gripping markets as investors struggle to get a read on US rate hike expectations. Markets had been highly expectant of SNB easing over the summer months, but these expectations have now eased somewhat especially with EUR holding ground. 2Q Swiss GDP printed much stronger than expected at 2% vs. 0.8% YoY whilst August CPI printed in-line with expectations at -0.1% YoY.

AUDUSD

Non-Commercials reduced their net long positions in the Australian Dollar last week selling 4k contracts to take the total position to LONG 39k contracts. This latest reduction in AUD long positioning reflects the risk off mood which has been taking hold of markets as traders begin to increase US rate hike expectations. In line with comments made by Fed Chair Yellen and various other Fed members in support of a US rate hike this year, investors have been unwinding carry trades in higher-yielding currencies with AUD among those suffering losses consequently. The RBA recently kept rates on hold in September with a very muted statement which noted their expectations that inflation is likely to remain low for some time. Traders now await comments from Fed’s Brainard later today who will be the last Fed speaker before the upcoming September FOMC next week.

USDCAD

Non-Commercials reduced their net long positions in the Canadian Dollar last week selling 1k contracts to take the total position to LONG 21k contracts. This reduction in CAD long positioning reflects a trio of factors currently weighing on the commodity currency. First, is the unwinding of carry trade positions amidst increased US rate hike expectations. Second, is the Dovish tone of the BOC who traders now expect will be forced to ease again later in the year. Finally, the recent downturn in Oil prices threatens to further sink domestic growth which took a sharp nosedive in 2Q.

(Visited 19 times, 1 visits today)

With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.

START TRADING

or practice on DEMO ACCOUNT

Trading CFDs Involves high risk of loss

With over 6 years’ experience analysing currency markets, James is now a well-known industry analyst focusing on price action trading and fundamental drivers. Beginning as a private retail trader, James developed a strong interest in understanding the fundamental aspect of the market before pursuing technical trading capabilities which he now uses to identify opportunities over a short-term horizon. Alongside his market experience, James is also IMC certified having achieved the qualification to help further his understanding not only of the markets but the industry as a whole. James has a strong interest in both fundamentals and technicals and uses both forms of analysis in generating and executing trade ideas, with trades generally lasting from a few hours to a few days.

© Orbex