FX COT Update: EUR Shorts Near Neutral Levels

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This data references the period ending Tuesday, March 28th.

 EURUSD

Non-Commercials reduced their net short positions in the EUR last week buying a fucker 12k contracts to take the total position to -8k. This latest adjustment means EUR short positions are now at their lightest levels in four years.  Traders have been steadily unwinding long held short positions as hawkish ECB expectations have grown stronger over recent months. At their last meeting, ECB chief Draghi declared victory against deflation and sounded upbeat regarding the economy. Markets have quickly moved to price in a rate hike by next year, fuelling the aggressive level of short squaring seen.

The latest data print suggested caution however as CPI was seen softening in February after rising at its fastest pace in two years. The ECB have regularly noted that they are looking through the current rise in inflation as being only temporary and linked to energy prices.  Traders will pay close attention to Draghi, who speaks twice over the week, for further clues as to the ECB’s monetary policy plans.

GBPUSD

Non-Commercials reduced their net short positions in Sterling last week buying 4k contracts to take the total position to -104k contracts. As shorts have once again grown to record levels, downside momentum is drying up. In a move that was widely signalled, and thus priced in, the UK government formally triggered Article 50 last week by sending a letter of notification to the European Council.

Trades will now need to wait until the first Brexit summit at the end of this month before learning of the guidelines to be adopted during exit negotiations. Uncertainty remains however as rhetoric from European officials continues to promise a challenging and potentially hostile path for negotiations. On the data front, traders will this week be watching PMI data sets for March to see how growth has fared over the last month as the country waiting for the triggering of Article 50.

USDJPY

Non-Commercials reduced their net short positions in the Japanese Yen last week buying 14k contracts to take the total position to -53k contracts. This marks the second consecutive week of buying in the Japanese Yen which has benefited from a safe haven bid and lower US yields in response to the failure of Trump’s health care bill.  On the data front, the outlook for manufacturing improved (1Q: 11 vs. 4Q: 8) with a similar uptick in the outlook for nonmanufacturing (1Q: 16 vs 4Q: 16). Later in the week traders will be watching PMI data sets for March.

USDCHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling a further 4.5k contracts to take the total position to -16k contracts. This marks the second consecutive week of selling in the Swiss Franc and reflects the more optimistic mode in the Eurozone following the safe passing of both the Dutch and Australian elections. The political risk attached to the French elections is also fading which should provide further scope for a move lower in the safe-haven CHF.

AUDUSD

Non-Commercials increased their net long positions in the Australian Dollar last week buying a further 8k contracts to take the total position to 53k contracts. This marks the second consecutive week of buying in AUD which has been in steady demand over 2017 -to date.  Traders this week will be focusing on the RBA rate decision which is expected to see the bank remain on hold once more. However, following a recent increase in hawkish sentiment at their last meeting traders will now be closely watching this meeting to see if there is any follow through or if the bank strike a more neutral tone this time.

USDCAD

Non-Commercials increased their net short positions in the Canadian Dollar last week selling a further 4k contracts to take the total position to -28k contracts. This marks the fourth consecutive week of selling in CAD which has undergone a sharp reversal in sentiment among investors.

Despite the bearish turn, data released last week showed that the economy grew more than expected in January at 2.3% and has now grown at least 0.3% for seven out of the past eight months. This week traders will be watching the Unemployment rate which is due on Friday.

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