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US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

Justin McQueen, Analyst

US Dollar, USD/CAD, GBP/USD, COT Report –Analysis

  • USD Shorts Jump
  • Speculators Hold Largest CAD Net Long Since Late 2019
  • Safe-Havens Remain Out of Favour

US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

In the week to May 11th and heading into the US inflation data, investors had continued to sell the US Dollar with net shorts growing by $3bln, to total $15.6bln. This may have also in part explained the brief spike following the higher than expected inflation figures with the move likely exacerbated by a short squeeze (next week’s data will highlight if this was the case). That said, with the Fed continuing to look through inflation spikes and seemingly more focused on the jobs market, which disappointed expectations, higher inflation is likely to result in real rates deeper in negative territory and thus weigh on the greenback.

A large bulk of the USD selling had stemmed from inflows into both the Canadian Dollar and Pound. Speculative positioning looks to have jumped onto the bullish CAD trend, which started after the BoC’s hawkish pivot. Net longs in the Loonie grew by $1bln (5.9% OI) during the reporting week, following another sizeable increase in outright longs and thus speculators are the most bullish on CAD since late 2019. That being said, there is a slight cause for concern with spot CAD overshooting the moves seen in both oil and US/CA bond spreads, therefore, should oil rollover, USD/CAD is at risk of a reversal.

Elsewhere, the Pound saw a modest bout of buying as GBP had been underpinned by reduced political tail risks after the SNP failed to gain a majority at the Scottish Election. The outlook remains constructive for the Pound with the 1.40 handle remaining a key level for dip buyers to re-emerge.

Safe-havens remained out of favour as JPY and CHF net shorts grew with the latter seeing more aggressive selling. The Swiss Franc’s flip to net short had been primarily driven by leveraged funds, which in turn, given the improvements in the Euro Area sees EUR/CHF risks tilted to the upside. Analyst pick on EUR/CHF (full analysis)

Weekly FX Positioning

US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

Source: CFTC, DailyFX (Covers up to May 11th, released May 14th)

The Analytical Abilities of the COT Report

How to Read the CFTC Report

US Dollar Positioning

US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

Source: Refinitiv, DailyFX

USD/CAD Positioning

US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

GBP/USD Positioning

US Dollar Selling Persists, CAD Bulls Largest Since Late 2019 - COT Report

Source: Refinitiv, DailyFX

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