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COT Report: Analysis and Talking Points

  • CAD Extends Bullish Positioning
  • GBP Net Shorts Highest Since September 2018
  • AUDUSD Short Squeeze Underpins Currency

The Predictive Power of the CoT Report

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Source: CFTC, DailyFX (Covers up to July 9th, released July 12th)

CAD Longs Extend, AUD Shorts Squeezed, GBPUSD Outlook Remains Bearish - COT Update

USD selling had stalled throughout July 2-9th, this would have largely been due to the better than expected NFP release. Net long USD positioning had risen by $679mln vs G10 currencies to $16.945bln with the bulk of the buying against GBP and EUR. Overall USD positioning had been left largely unchanged at $12.377bln.

GBP shorts continue to build amid the souring sentiment for the currency. As such, net shorts are the highest in GBP across the G10 complex, which is now the largest since September 2018 at $5.68bln. Gross shorts jumped to 109k from 97k as speculators continue to fret over the combination of weakening economic data and rising no-deal Brexit risks.

Commodity currencies had gained against the USD with speculators extending their bullish positioning in the Canadian Dollar by $222mln to $700mln as the currency hit a fresh 2019 highs. Elsewhere, AUD has seemingly found a floor in the near-term with the currency finding support from the speculative short squeeze. However, the sentiment remains bearish on the Aussie and while investors maybe taking short positions off the table, they have also been reluctant in adding fresh longs.

IG CLIENT SENTIMENT (RETAIL POSITIONING): AUDUSD

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Data shows 62.3% of traders are net-long with the ratio of traders long to short at 1.65 to 1. The number of traders net-long is 2.7% lower than yesterday and 16.0% higher from last week, while the number of traders net-short is 13.9% lower than yesterday and 30.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDUSD 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 AUDUSD-bearish contrarian trading bias.

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