US Dollar, GBP/USD, USD/CAD COT Report –Analysis
USD Sold, GBP/USD Flips Net Long & CAD Buying Boosted – COT Report
In the reporting week to October 19th, net USD longs slipped for a second consecutive week. This is largely in fitting with the price action, which has seen the greenback pullback from its YTD high. However, this appears to be more of an adjustment in positioning as opposed to the beginning of a trend lower.
Elsewhere, the Pound flipped to net long for the first time in a month. This had largely stemmed from real-money buying (+$2.4bln) with investors gearing up for an earlier than expected rate hike from the Bank of England. In turn, as we near the pivotal November 4th rate decision, it is likely that speculators will add to GBP longs. That being said, with my view that the bar has been set high for the Bank to surprise on the hawkish side, the risk is geared towards a disappointment even in the event of a hike given the current market pricing and thus this leaves the Pound vulnerable to a pullback.
Across the commodity-linked currencies, Canadian Dollar buying picked up notably as rising oil prices continued to lend support. Additionally, with the Bank of Canada looking to tighten policy, this has been another factor for speculators piling into the Loonie. Meanwhile, the Australian Dollar saw a slight reduction in net shorts, however, while the Aussie has made good ground this month, the pair has struggled to maintain a foothold above the 0.7500 handle. In turn, with copper prices easing a touch, the bias for AUD may be a sell on rallies.
Funding currencies were out of favour as net shorts in JPY and CHF grew by $2.97bln and $0.6bln respectively. In an environment of rising equities and yields there has been little appetite to seek out low yielders, aside from the fact that Japanese Yen selling had hit extremes, however, buyers are likely to re-emerge on cross-JPY and CHF dips, particularly against high-yielders.
| Change in | Longs | Shorts | OI |
| Daily | 40% | -24% | -4% |
| Weekly | 19% | -3% | 6% |
Weekly FX Positioning
Source: CFTC, DailyFX (Covers up to October 18th, released October 22nd)
The Analytical Abilities of the COT Report
US Dollar Positioning
Source: Refinitiv, DailyFX
GBP/USD Positioning
Source: Refinitiv, DailyFX
USD/CAD Positioning
Source: Refinitiv, DailyFX
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