US Dollar, EUR/USD, USD/JPY, COT Report –Analysis
- US Dollar Selling Persists
- Japanese Yen Longs Looking Stretched
- Canadian Dollar Remains Vulnerable
The Predictive Power of the COT Report
Source: CFTC, DailyFX (Covers up to Apr 7th, released Apr 10th)
US Dollar Selling Persists, JPY Bulls in Charge, CAD Risks Reversal - COT Report
As of April 7th, CFTC data shows that investors continued to raise their US Dollar bearish bets by another $1bln. Once again, the build-up in USD shorts had been led by positioning changes in the Euro and Japanese Yen.
Bearish positioning in USD/JPY looks to be increasingly stretched as speculators continue to raise the net bullish positions in the Japanese Yen. However, given that the Federal Reserve remains aggressive in its stimulus program, particularly concerning dollar funding, we continue to see risks as skewed to the downside for the pair.
Net bullish positions in the Euro picked up yet again (+$600mln) and thus remaining the largest bullish bet since mid-2018. However, we are cognizant of the fact that net longs have largely been due to the unwind of gross shorts and thus with this unwind beginning to flatten out, upside in the Euro may be hard to come by. In turn, we see 1.1000 as the key pivot point for EURUSD.
Across commodity currencies, speculators raised their net shorts on both the AUD and CAD by $240mln and $186mln respectively. That said, despite the recent upside in the Canadian Dollar as of late we expect the currency to remain vulnerable to weak oil prices as the historic OPEC+ oil production cut agreement fails to fully compensate the expected hit to oil demand.
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--- Written by Justin McQueen, Market Analyst
Follow Justin on Twitter @JMcQueenFX
