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USD Bulls Stalling, GBP Buyers Step in, Risks Rising for CHF - COT Report

USD Bulls Stalling, GBP Buyers Step in, Risks Rising for CHF - COT Report

Justin McQueen, Strategist

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

  • US Dollar Buying Stalls
  • Broad GBP Demand, JPY Shorts Squeezed

US Dollar Bulls Stalling, GBP Buyers Step in, Risks Rise for CHF

In the week to April 3rd, the latest CFTC report showed a slight stalling in USD longs after recently flipping net long. Keep in mind, however, that this does not cover the period since the more hawkish than expected Vice Chair Clarida as well as the strong NFP report. In turn, speculators likely resumed USD buying and with yields finding a short term bottom, downside looks limited for the greenback into the Jackson Hole Symposium.

Broad demand for the Pound with leveraged funds and asset managers both net buyers. The most recent update from the BoE regarding the sequencing of its exit from very accommodative monetary policy is likely to provide underlying support, particularly against those that will likely stick to the lower for longer mantra, namely the ECB. Therefore, downside risks remain for EUR/GBP on the diverging monetary policy theme.

Speculative demand for safe havens differed as shorts in the Japanese Yen were squeezed as the currency tracked US yields lower, while the Swiss Franc saw a slight unwind in net longs. That said, with US yields finding a floor, JPY may well reverse lower should equity markets remain stabilised, although, as taper risks rise and the Delta variant begins to hit Asia, an equity wobble could be on the horizon and thus underpin JPY. The Swiss Franc, however, is starting to become a concern for bulls with both USD/CHF and EUR/CHF seeing countertrend rallies. Alongside this, with the latest SNB total sights deposits seeing the biggest weekly increase since May, this suggests that the central bank has started to take more notice of the recent strength in the Swiss Franc, raising risks for a crowded market.

Weekly FX Positioning

USD Bulls Stalling, GBP Buyers Step in, Risks Rising for CHF - COT Report

Source: CFTC, DailyFX (Covers up to August 3rd, released August 6th)

The Analytical Abilities of the COT Report

How to Read the CFTC Report

US Dollar Positioning

USD Bulls Stalling, GBP Buyers Step in, Risks Rising for CHF - COT Report

Source: Refinitiv, DailyFX

GBP/USD Positioning

USD Bulls Stalling, GBP Buyers Step in, Risks Rising for CHF - COT Report

Source: Refinitiv, DailyFX

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