US Dollar, EUR/USD, GBP/USD, COT Report –Analysis
- US Dollar Shorts Continue Unwind
- GBP/USD Outlook Grows More Bearish
- Investor Positioning Little Change, Highlighting Choppy Price Action
The Predictive Power of the COT Report
Source: CFTC, DailyFX (Covers up to May 12th, released May 15th)
US Dollar Shorts Unwind, GBP/USD Growing More Bearish - COT Report
In the week ending May 12th, speculators had reduced their net shorts in the US Dollar by a marginal $144mln against G10 currencies. In turn, this reflects that recent choppy price action across the FX space with the majority of currencies trading in relatively tight ranges.
Once again, investors raised their net shorts in the Pound with overall bearish bets totalling $1bln. However, given that GBP is now faced with EU-UK trade talks reaching an impasse ahead of the transition period deadline (June 30th), short positioning is marginal at best and thus somewhat under-pricing political risks. While BoE officials have been talking up the prospects of NIRP reaching the UK.
Antipodeans (AUD, NZD) were net sold by non-commercials with rising US-China tensions beginning to weigh on high-beta currencies. Alongside this, Australia is also caught up in a trade spat with China, which in turn could see tariffs placed on Australia. Elsewhere, the outlook for NZD remains notably weak, particularly after last week’s dovish RBNZ meeting, in which the central bank had been more explicit on negative rates while also opening up the door to direct FX intervention.
Across the safe-havens, the Swiss Franc saw a slight easing of its bullish bets with the currency net sold by $144mln as further CHF upside remains capped, while JPY saw a slight increase in net longs.
The Euro saw a marginal increase in bullish positioning (+$257mln), however, leveraged funds and real money flows had been net sellers of the currency. In light of the soft macro backdrop and concerns over Europe's stability, risks remain tilted to the downside in EUR/USD.
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--- Written by Justin McQueen, Market Analyst
Follow Justin on Twitter @JMcQueenFX
