A snapshot view of large speculative positioning from the weekly COTS report and analysis of related markets.
The Canadian and Australian Dollar saw the largest increase in long bets at 13.9k and 13.1k respectively.
CAD saw the largest net change of 16.6k contracts which pushed it to net long for the first time since March. This makes the 8th consecutive week that net change has been positive which was helped by 9 weeks of short covering.
AUD gross shorts fell to their lowest level since Feb 2012 whilst longs moved to their highest since April ’17. This also puts net long exposure to its highest since April.
Yen net positioning is now its most bearish since Jan 2014 as gross shorts moved to their highest levels since July 2007.
EUR: The Euro is considering a break of the 2015 high and make a run for 1.20. The week closed near the high of the week to suggest continued bullish sentiment, yet as we are just beneath key resistance, we may find this level holds for now as profit taking take hold. Yet as we closed so close to the resistance level, we think the markets clearly want this level to break sooner than later. We remain above a bullish trendline and gross longs continue to trend higher whilst short interest remains subdued, which means Euro will remain on our bullish watchlist as we seek to buy any dips.
JPY: Traders continue to pile into short positions despite the rising Yen. The two weeks of gains has removed the potential for a double top, although this could form into a triple top of triangle pattern. The lack of bearish interest suggests the rally may fizzle out, although if they are proven to be on the wrong side of the market then there are a lot of shorts to cover which could propel prices higher. For now, our bias is for limited upside on the Yen so we will monitor for signs of weakness. A break of 9,192 invalidates the bearish bias and short-covering could be expected.
AUD: The Australian Dollar stopped within pips of the 80c mark before RBA’s assistant governor, Guy Debelle jawboned the currency. A rising currency is causing issues for the RBA as it dents their exports and growth figures, so we may find Tuesday’s monetary policy meeting has a dovish twist. Up until Friday’s speech, traders continued to pile into longs as shorts were reduced, which is the ideal scenario for a healthy bullish trend. Yet now the EBA has begun verbal interventions once more we may find longs are reconsidering the situation which may see AUD capped below 80c this week. We do not see an immediate threat to the bullish trend which may help it remain above 78c, yet we’ll have a firmer idea on Tuesday how dedicated they are to keeping a cap on prices. If there is no dovish twist then 80c could indeed break to the upside this week.
CAD: Where we question AUD’s ability to break 80c this week, we have more confidence in CAD’s ability to break this milestone. Traders switched to net long for the first time since March as gross longs rise and short continue to be covered. Technically the trend appears strong and sentiment also pushed higher. This makes CAD longs a preferred currency of choice in the week/s ahead as we seek potential opportunities against weaker pairs. Once or if 80c is broken, the 2015 highs of 0.84 are the next milestone which also coincides with a 100% projection.
NZD: The Kiwi Dollar continues to fly higher against RBNZ’s will. Commodity currencies remain well supported since the USD has been dragged over by flailing Whitehouse policies and soft US data. The positive carry NZD offers only makes the temptation to long the currency even greater. Technically this remains in our bullish watchlist to buy any pullbacks and we could see a break of the 2016 high this week as it moved towards 77c.
