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COT Report: Analysis and Talking Points

  • CAD Shorts Cut by $1.7bln
  • USD Bulls Continue to Head for the Exit
  • GBP Outlook Remains Soft

The Predictive Power of the CoT Report

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Source: CFTC, DailyFX (Covers up to June 25th, released June 28th)

CAD Shorts Cut, USD Bulls Exit, GBP Sentiment Remains Weak - COT Update

Exiting of USD longs continued, albeit materially less than the prior week with bullish positioning easing by $890mln. Elsewhere, with Canadian data continuing to outperform relative to major counterparts and with oil prices back on the rise, overall net CAD shorts have seen a large reduction of $1.7bln as speculators cut gross shorts by 18k contracts and added gross longs by 5k contracts.

Japanese Yen net shorts have been roughly pared with speculators yet again cutting back on gross shorts, while fresh longs have been added. Constantly, shorts now outnumber longs by 1.3:1 from 3.17:1 two weeks ago.

GBP shorts now at the highest since January 18th as speculators increase their bearish sentiment on the currency, as political uncertainty continues to weigh, while weak UK data has also added to the softening backdrop. The Euro remains the largest shorted currency against the greenback as investors slightly paired back their gross longs resulting in a $667mln increase in net Euro shorts.

IG CLIENT SENTIMENT (RETAIL POSITIONING):

Data shows 54.1% of traders are net-long with the ratio of traders long to short at 1.18 to 1. The number of traders net-long is 0.7% lower than yesterday and 20.2% lower from last week, while the number of traders net-short is 15.1% lower than yesterday and 87.0% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests NZDUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger NZDUSD-bearish 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