FX COT Update: JPY Short Position Hits Highest Level Since 2014

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FX COT Update: Sterling Short

EURUSD

Non-Commercials reduced their net long positions in the Euro last week selling 1k contracts to take the total position to 84.5k contracts. The pause in bullish momentum for EUR positioning can partially be explained by continued political uncertainty in Germany, though given that the EUR rose over 1% against the USD last week, it appears that the market is not too concerned. The SPD has agreed to talks with the CDU/CSU though the possibility of another “grand coalition” forming, remains quite slim. Eurozone data has continued to print positively over recent weeks and traders will this week be monitoring inflation with the Eurozone CPI due on Thursday, which is expected to have increased over November.

GBPUSD

Non-Commercials reduced their net short positions in Sterling last week buying 4.6k contracts to take the total position to -4.5k contracts. Positioning has been fluctuating wildly in GBP over recent weeks as investors continue to struggle to get a grasp on GBP direction. Uncertainty linked to the ongoing Brexit talks, along with the fragile domestic political situation, is providing a bearish counterweight to hawkish BOE expectations. The key data focus this week will be on the manufacturing PMI due later in the week, which is expected to remain buoyant due to a weakened GBP.

USDJPY

Non-Commercials increased their net short positions in the Japanese Yen last week, selling 8k contracts to take the total position to -136k contracts. JPY continues to be heavily sold by investors with short positions moving to their highest level since 2014. Policy divergence between the BOJ and the majority of the other G10 central banks, remains at the heart of the JPY short trade. As such, the key focus this week will be on speeches by the BOJ’s Nakaso (on Wednesday) and Iwata and Harada (on Thursday). In terms of data, the key reading in October inflation (due Friday) is expected to have fallen from the prior reading and should therefore keep selling pressure intact.

USDCHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling 3k contracts to take the total position to -28k contracts. Bearish pressure on CHF has grown following the ECB’s tapering announcement. As with the BOJ, the SNB has reaffirmed its commitment to easing and as such, traders are expecting CHF to remain pressured. At it’s upcoming December meeting, the SNB is widely expected to once again reaffirm it’s easing stance and reiterate its willingness to remain active in the market.

AUDUSD

Non-Commercials reduced their net long positions in the Australian Dollar last week selling 1.4k contracts to take the total position to 44k contracts. The AUD long position, which built up over the first half of the year on increased RBA rate-hike expectations, has now been reduced by around a third. Data weakness and messages of concern from the RBA have seen a dialling back in rate-hike expectations, with some at the RBA warning that the bank should not rule out a further rate cut.  However, stabilisation in iron ore prices over recent weeks have provided a floor and should offer further support going forward.

USDCAD

Non-Commercials reduced their net short positions in the Australian Dollar last week selling 3.5k contracts to take the total position to 47k contracts. CAD has been under consistent selling pressure over the last month as traders have dialled back BOC rate-hike expectations into year-end due to weaker data. This week we will get the last hard data readings ahead of the BOC’s December meeting with Q3 GDP and the November employment report both due on Friday. While labour conditions have remained solid, and are expected to print positively in November, a weaker than expected GDP reading would further weigh on the BOC’s rate-hike expectations leading to further CAD weakness.

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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.

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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.

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