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COT Report: Analysis and Talking Points

  • USD Bullish Positioning eases to $34.669bln vs. G10 Currencies
  • Largest Change in Euro and Japanese Yen Positions
  • Swiss Franc Shorts Remain Stretched

The Predictive Power of the CoT Report

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Source: CFTC, DailyFX (Covers up to June 4th, released June 7th)

EUR and JPY Shorts Cut as USD Bulls Scale Back– COT Update

USD positioning saw a modest pullback in longs with bullish bets vs G10 currencies at $34.669bln. The decline in USD longs had largely stemmed from the sizeable reduction in Euro (-$1.6bln) and Japanese Yen (-$1.2bln) net shorts amid increased expectations that the Federal Reserve will begin a new easing cycle.

Elsewhere, speculators continued to add to GBP bearish positions given that the fundamental outlook remains fragile for the UK as concerns over Brexit persist. GBP net shorts now at the highest since late January.

AUD bearish positions eased slightly on the back of marginal short covering, consequently, pulling back from the highs seen in 2015. Investors remain very short the Swiss Franc with shorts outnumbering longs by 8.9:1 (Prev. 8.4:1), which in turn raises the risk of a short squeeze.

IG CLIENT POSITIONING:

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IG client datashows 39.7% of traders are net-long with the ratio of traders short to long at 1.52 to 1. The number of traders net-long is 11.9% lower than yesterday and 32.4% lower from last week, while the number of traders net-short is 5.1% higher than yesterday and 77.3% higher from last week.

We typically take contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

US Dollar

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EURUSD

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GBPUSD

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USDJPY

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USDCHF

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USDCAD

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AUDUSD

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NZDUSD

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KEY TRADING RESOURCES:

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX