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  • USD/JPY strengthening during trade, adding to an impressive run for the Dollar/Yen pair in 2021 https://t.co/xHRuS8D2i0
  • Commodities Update: As of 19:00, these are your best and worst performers based on the London trading schedule: Silver: -0.21% Oil - US Crude: -0.21% Gold: -1.02% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/4hoyPt34ex
  • The latest CFTC positioning data for the week ending March 2nd saw speculators continue to unwind their US Dollar net shorts. Get your market update from @JMcQueenFX here:https://t.co/S3Kx4OBphE https://t.co/fejOV0AXYv
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.43%, while traders in Germany 30 are at opposite extremes with 80.92%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/klgOuNPYtk
  • Indices Update: As of 19:00, these are your best and worst performers based on the London trading schedule: Wall Street: 1.45% US 500: 0.20% France 40: -0.10% Germany 30: -0.25% FTSE 100: -0.33% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/umSIPmSxrY
  • $EURCAD has continued to head lower today, now trading right around the 1.5000 level. The pair hit a fresh one-year low, currently trading at its lowest level since early March of last year. $EUR $CAD https://t.co/Oj9JYasyTU
  • US Indices are rebounding from last week's sell off today. The Dow is leading the way, rising to a fresh all-time high. The Nasdaq remains negative for the day. DOW +2.00% NDX -0.55% SPX +0.91% RUT +1.70% $DIA $QQQ $SPY $IWM
  • Another look at the deviation in 'internal' interest in US equities: the candle is the Nasdaq 100 to S&P 500 ratio ($NDX-$SPX) overlaid with the S&P 500 itself in blue https://t.co/m2WK4Q2Bs5
  • A notable deviation in direction from the tech-heavy Nadex composite (candle) overlaid with the S&P 500 in blue. The 5-day correlation is still holding up but will start deviating fast at this pace https://t.co/VYY5imk1yS
  • $USD has been pretty strong over the past couple of weeks and to a lesser degree, so far in 2021 but we've only retraced about 23.6% of that massive sell-off that started last March $DXY https://t.co/t5KRSYu0TP
US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought  - COT Report

US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought - COT Report

Justin McQueen, Analyst

US Dollar, NZD/USD, USD/JPY, COT Report –Analysis

  • US Dollar Short Squeeze Risks Reduced
  • USD/JPY Tracking US Rates
  • NZD Overbought Ahead of RBNZ

US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought - COT Report

CFTC positioning data for the week ending February 16th saw a slight reduction in USD shorts, with the move primarily driven by leveraged funds, as real money accounts net sold the greenback. Over the past month, speculators have lightened on USD shorts, which in turn has quelled concerns over a possible violent short squeeze in the greenback, allowing for rallies to present opportunities to reload shorts.

Elsewhere, across the FX space, the big story has revolved around the move in fixed income and its implications for broader markets as taper tantrum calls grow louder. The rally in US yields has seen the Japanese Yen among the notable underperformers in recent sessions. That said, given the deterioration in JPY, it a rather surprising that net longs have picked up slightly with fast money accounts adding to their bullish bets. So far, the rally in bond yields haven’t led to a sizeable pullback in equity markets, however, should we see an extension to the move with the US 10yr yielding close to 1.5%, I suspect equity markets will roll over, leaving lofty tech stocks vulnerable to a correction. Although, as upside risks remain for US yields, risks remain tilted to the upside for USD/JPY.

The New Zealand Dollar remains the most overbought currency with both fast money and real money accounts boosting their net longs. However, despite this, the Kiwi has been underperforming against the Aussie in recent weeks. Going forward, the main focus for the Kiwi will be the RBNZ monetary policy, where the central bank will most likely acknowledge the better than expected recovery in the NZ economy. In turn, with the RBNZ closer to their objectives relative to the RBA, AUD/NZD may struggle in the near term (full analysis here).

Reduced political risk premium and a successful vaccine rollout program has seen the Pound become this year's top performer in G10 FX so far. Net longs have picked up and expectations are that speculators will grow even more bullish on the Pound. Last week saw GBP/USD top 1.40 for the first time in nearly 3yrs and given that momentum remains very much on Sterling’s side, there is little in the way of technical resistance until the 2018 double top at 1.4350. The Pound is likely to remain a better performer against low yielders such as CHF, JPY and the EUR. However, one caution I would add is that the Pound is trading at overbought levels across the board and so while the outlook remains upbeat, there are risks of a slight pullback before the next leg higher.

GBP/USD BEARISH
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 17% 13% 15%
Weekly 6% -11% -3%
What does it mean for price action?
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Weekly FX Positioning

US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought  - COT Report

Source: CFTC, DailyFX (Covers up to February 16th, released February 19th)

The Analytical Abilities of the COT Report

How to Read the CFTC Report

US Dollar Positioning

US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought  - COT Report

Source: Refinitiv, DailyFX

GBP/USD Positioning

US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought  - COT Report

Source: Refinitiv, DailyFX

1-Week and 4-Week Positioning Change

US Dollar Short Squeeze Risks, USD/JPY Upside, NZD/USD Overbought  - COT Report

Source: Refinitiv, DailyFX

If you would like to receive the full COT FX breakdown, contact IG.

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