US Dollar, EUR/USD, USD/JPY, COT Report –Analysis
The Analytical Abilities of the COT Report
Source: CFTC, DailyFX (Covers up to December 22nd, released December 28th)
US Dollar Sentiment Deteriorates, CAD Flips to Bullish - COT Report
In the week to December 22nd, CFTC data highlighted that aggregate USD net short positioning grew by $3.3bln against G10 currencies to total $30.9bln (3-month high). Renewed selling in the greenback had been led by the Canadian Dollar as investors flipped to net-long for the first time since March. Among the factors supporting the bullish outlook on the Loonie had been the improved outlook in the oil complex as investors look for a cyclical recovery. That said, with CAD shorts unwinding, the currency may stand to gain against the likes of NZD where longs are somewhat stretched. Elsewhere, while sentiment on the USD has continued to deteriorate, there is a heightened risk of a short-squeeze in the greenback, particularly as COVID concerns remain elevated.
The Pound saw a slight pick-up in net longs ahead of an expected UK-EU trade deal. Although, with a trade deal reached, the narrative now shifts to the UK’s handling of coronavirus, in turn, with the UK economy remaining relatively weak as large parts of the UK are facing tough lockdown measures, GBP risks a “buy the rumour, sell the fact” reaction on the back of the Brexit deal.
| Change in | Longs | Shorts | OI |
| Daily | 5% | 12% | 7% |
| Weekly | -3% | 3% | -1% |
Across the safe-haven currencies, the bullish positioning in the Japanese Yen and Swiss Franc grew by $260mln and $270mln respectively. Although, with Japanese Officials keeping a close eye on the 100 barrier in USD/JPY questions are raised as to how much lower the pair can go, particularly as the Nikkei 225 hits fresh 30yr highs.
US Dollar |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
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