FX COT Update

EUR Net Short Positions Building As Market Takes Focus Off ECB

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EURUSD

eurusd

Non-Commercials increased their net short positions in the Euro last week selling a further 3k contracts to take the total position to -5k contracts. EUR has now spent its second consecutive week below the line in terms of positioning with investors having heavily adjusted their view on the single currency following the ECB’s July meeting which saw the bank confirming its commitment to maintaining rates at current levels until at least summer 2019. This message was reaffirmed in August and with data continuing to underperform, many are already weighing the risk of rates being held at current levels for longer than forecast.

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GBPUSD

gbpusd

Non-Commercials increased their net short positions in Sterling last week selling a further 12k contracts to take the total position to -72k contracts. GBP has been under heavy selling pressure over the last few months as Brexit concerns have risen to the top of the pile in terms of investor focus. With talk of a “no deal” Brexit growing ever present, the government is growing increasingly concerned, exacerbating investor uncertainty. Added to this is the view that the BOE will not be raising rates again until after the Brexit deadline as suggested by the bank’s constant forecast inflation target given at the August meeting.

USDJPY

usdjpy

Non-Commercials reduced their net short positions in the Japanese Yen last week buying 11k contracts to take the total position to -47k contracts. This latest bout of JPY buying comes despite a broad improvement in global risk sentiment in response to USD weakness. Indeed, the S&P500 soared to fresh record highs as Fed chairman Powell’s Jackson Hole speech gave no indication that the Fed is looking to step up its current tightening policy. Coming into focus over the next few weeks for JPY traders is the LDP leadership election. If it seems likely that Abe could be removed as party leader this could be likely to drive JPY upside as Abe’s super-reflationary policies could be curbed.

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USDCHF

usdchf

Non-Commercials increased their net short positions in the Swiss Franc last week selling 1k contracts to take the total position to -47k contracts. CHF positioning adjustment has been rather muted recently though this latest wave of selling reflects the better risk environment seen in the market in response to a weaker US Dollar and hopes of a scaling back of trade tensions between the US and China alongside the holiday in Turkey and the PBOC achieving stability in USDCNY.

AUDUSD

audusd

Non-Commercials reduced their net short positions in the Australian Dollar last week buying 1.5k contracts to take the total position to -50k contracts. The resignation of Australian PM Malcolm Turnbull last week had been on the cards for a while and the resulting leadership contest saw Treasurer Scott Morrison beat Home Affairs Minister Petr Dutton, causing a short-term spike higher in AUD. However, the domestic political environment remains in a fragile state as does the domestic economy. The RBA continues to highlight the residual challenges which remain such as ballooning household debt.

USDCAD

usdcad

Non-Commercials increased their net short positions in the Canadian Dollar last week selling a further 1k contracts to take the total position to -27k contracts. The continued short position in CAD reflects investors’ hesitation ahead of the upcoming September BOC meeting. The OIS curve for CAD is currently pricing in only a 27% chance of a hike. However, it is worth noting that there are upside risks given recent strong employment and inflation data. Furthermore, while NAFTA negotiations have been a cause for concern, the prospect of a deal has alleviated come concern here. Ahead of the meeting, traders will this week be focusing on 2Q GDP which could give the BOC the final boost it needs.

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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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