FX COT Update: EUR Upside Losing Steam As ECB Highlights Concern Over Weak USD

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Concern Over Weak USD

EURUSD

Concern Over Weak USD 1

 

Non-Commercials reduced their net short positions in the Euro last week selling 8k contracts to take the total position to 141k contracts. Following a steady month of buying, EUR has seen some position squaring in recent trades, as the market was spooked by comments from ECB’s Nowotny, who highlighted his concern over weak USD. Having surged to multi-year highs, some position squaring is to be expected and unless there are any further negative comments from ECB, we are likely to find dip buyers. On the data front this week, traders will be watching eurozone 4Q GDP due on Wednesday and expected to remain unchanged at 2.7%.

 

GBPUSD

Concern Over Weak USD 2

 

Non-Commercials reduced their net long positions in Sterling last week selling 4k contracts to take the total position to 28k contracts. GBP has now been net sold for two consecutive weeks as bullish momentum stalls following the BOE’s latest meeting. The BOE voting unanimously to keep rates on hold though did revise higher their growth forecast for 2018. The meeting was deemed as a “hawkish hold” and traders will be closely watching the latest CPI data due this week which is expected to show core CPI ticking higher over January. CPI recently softened in December and if there is any further softening over January this will likely exacerbate the selling in GBPUSD.

 

USDJPY

Concern Over Weak USD 3

 

Non-Commercials reduced their net short positions in the Japanese Yen last week buying a further 2k contracts to take the total position to 113k contracts. The record short position in JPY continues to be reduced as the market anticipates that the BOJ is considering a shift in policy. JPY is also garnering support from a deterioration in risk sentiment as equities market continues their slide. Any further selloff in global equities should continue to see JPY buying kick in. On the data front this week traders will be watching 4Q GDP due on Tuesday, expected to have fallen to 1% from 2.5% prior. Alongside data, traders will be watching developments in equity markets as risk appetite will remain a key driver of JPY flows.

 

USDCHF

Concern Over Weak USD 4

 

Non-Commercials kept their net short positions in the Swiss Franc last week with the net position standing at -20k contracts. The SNB continues to highlight its willingness to remain in the market as necessary in order to stop any further CHF strengthening. The gradual normalisation of policy by the ECB along with a synchronised uptick in global growth should seeing swiss investors continue to push capital elsewhere, leading to a weaker CHF.

 

AUDUSD

Concern Over Weak USD 5

 

Non-Commercials increased their net long positions in the Australian Dollar buying a further .5k contracts to take the total position to 14k contracts. The Australian Dollar has been net bought for three out of the last four weeks as investors continue to anticipate a forthcoming rate increase by the RBA.  At its latest meeting the RBA kept rates unchanged but have an encouraging signal by noting the improvement in labour market conditions since the last meeting along with upgrading its GDP growth forecast. The key data print this week for AUD traders will be the  January unemployment rate due on Thursday, expected to remain unchanged at 5.5% with the consumer confidence reading due ahead of it on Tuesday.

 

USDCAD

Concern Over Weak USD 5

 

Non-Commercials increased their net long positions in the Canadian Dollar last week buying a further 7k contracts to take the total position to 40k contracts. Sentiment has strongly improved in CAD over recent weeks as the market anticipates a more aggressive BOC hiking cycle than was previously expected. The BOC continues to highlight its data dependant stance which presents two-way risk and given the uncertainty around NAFTA negotiations it seems likely that investors are getting ahead of themselves. The market is currently pricing in a further 2 rate hikes over 2018 and investors will be closely monitoring upcoming data releases for clues as to when and how the BOC is likely to adjust rates.

 

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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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