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USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips to Short – COT Report

USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips to Short – COT Report

Justin McQueen, Strategist

US Dollar, EUR/USD, AUD/USD, COT Report –Analysis

  • USD Bulls Increase, Despite Cautious Powell
  • AUD Negatives Priced In, Outlook Depends on RBA
  • CAD Flips to Net Short

USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips Shorts – COT Report

In the most recent reporting period to August 31st, speculators continued to pile into the USD, despite a relatively cautious Jackson Hole speech by Fed Chair Powell, which prompted the USD to pull back from multi-week highs. Net longs in the greenback are now at an 18-month high, although, with a percentile rank of 53%, positioning across a 3Y lookback is in no way stretched. However, the risk for the greenback is that with speculators already long dollars, an easing of the current slowdown in economic data, as well as risk appetite remaining firm may see recent USD weakness extend further.

Speculators continued to unwind net longs in the Euro as bullish bets were slashed by over $2bln, taking overall long positioning to $1.5bln. This has also taken place at a time where Bund yields have begun to trend higher as markets price in a more hawkish ECB with regards to the Bank possibly reducing the pace of PEPP purchases. Alongside this, as the German election approaches, much is being made of the rising momentum of the SPD in recent polls, which in turn would increase expectations for looser fiscal policy, a Euro positive.

Exposure in commodity currencies was reduced with the Canadian Dollar flipping to net short, while the Australian Dollar is the largest bearish bet when adjusted for open interest. As such, with negative news largely priced into the latter, the outlook will depend on the path for monetary policy with an initial focus on the upcoming RBA meeting where markets are somewhat 50/50 as to whether the RBA will delay taper or not, given the current Covid backdrop.

Weekly FX Positioning

USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips to Short – COT Report

Source: CFTC, DailyFX (Covers up to August 31st, released September 3rd)

The Analytical Abilities of the COT Report

How to Read the CFTC Report

US Dollar Positioning

USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips to Short – COT Report

Source: Refinitiv, DailyFX

EUR/USD Positioning

USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips to Short – COT Report

Source: Refinitiv, DailyFX

AUD/USD Positioning

USD Bulls Extend, AUD Outlook Depends on RBA, CAD Flips to Short – COT Report

Source: Refinitiv, DailyFX

If you would like to receive the full COT FX breakdown, contact IG.

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