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COT Report: Analysis and Talking Points

  • CAD Bulls Largest Since Feb 2018
  • GBPUSD Shorts at Extreme Levels
  • EUR Shorts Surge Ahead of ECB Meeting

The Predictive Power of the CoT Report

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Source: CFTC, DailyFX (Covers up to July 23rd, released July 26th)

CAD Bulls Boosted, GBPUSD Shorts at Extreme Levels - COT Update

The latest CFTC positioning shows that USD continued with net longs cut by $216mln to $16.14bln vs. G10 currencies, while overall USD long positioning had been cut to $11.5bln. The pullback in bullish USD positioning had largely been attributed to the increase in CAD net longs, which rose by $740mln to $2.34bln, marking the highest since Feb’18.

The Euro had seen the largely weekly change as speculators significantly boosted their net short positioning ahead of the ECB meeting with net shorts rising by over $1bln. Elsewhere, GBP bearish sentiment hit fresh extremes with net shorts now at $6.1bln (most since Sep’18) as speculators continued to liquidate their longs, which in turn sees Sterling as the largest net short within the G10 complex.

IG CLIENT SENTIMENT (RETAIL POSITIONING): GBPUSD

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Data shows 82.0% of traders are net-long with the ratio of traders long to short at 4.56 to 1. In fact, traders have remained net-long since May 06 when GBPUSD traded near 1.29347; price has moved 4.6% lower since then. The number of traders net-long is 0.7% higher than yesterday and 18.9% higher from last week, while the number of traders net-short is 7.9% lower than yesterday and 18.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBPUSD 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 GBPUSD-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