US Dollar, EUR/USD, GBP/USD, COT Report –Analysis
- US Dollar Raise Bearish Bets
- EUR/USD in Favour on Historic EU Aid Proposal
- Brexit Uncertainty Sees GBP Shorts Continue to Pick-Up
The Predictive Power of the COT Report
Source: CFTC, DailyFX (Covers up to May 26th, released May 29th)
US Dollar Raise Bearish Bets, EUR/USD in Favour - COT Report
In the week to May 26th, investors had raised their net shorts in the US Dollar for the first time in 5 weeks, raising bearish bets by $970mln to $7.6bln against its G10 counterparts. This came amid a notable pick-up in both JPY and EUR net longs of $834mln and $418mln respectively. However, with risk sentiment remaining buoyant, the US Dollar stands to weaken in the absence of a significant escalation of tensions between the US and China.
Brexit uncertainty continues to creep in for the Pound as speculators raise their short exposure in the currency. EU-UK trade talks will commence this week, although, given that both parties have been unwilling to budge from their red lines, a lack of progress could see GBP struggle in the short-term.
Bullish positioning in the Swiss Franc remains stretched and thus partly explains the sizeable appreciation in EUR/CHF as funds square positions amid the EU’s historic step towards debt mutualisation. Further signs that the ambitious EU package will be agreed would likely see an extension in EUR/CHF gains as sovereign risks recede.
Across the commodity FX space, investors remained cautious on the Australian Dollar with net shorts seeing a marginal increase. However, given that the currency has largely taken its cue from the pick-up in US indices, upsides risks for the Aussie may persist.
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--- Written by Justin McQueen, Market Analyst
Follow Justin on Twitter @JMcQueenFX
