According to calculations done by Reuters, the value of net long bets on the Greenback declined slightly from $24.95 billion to $24.44 billion.
This marks the second consecutive week of decline. Unlike the previous week, however, the latest Commitments of Traders forex positioning report from the CFTC shows that the Greenback’s losses were more broad-based.
In addition, it’s worth pointing out that net bearish bias on the yen got trimmed for the third week in the row while net positioning on the Aussie switched to net long after three straight weeks.
Oh, please keep in mind that the numbers below show the net positioning of non-commercial forex traders against the U.S. dollar.
If you’re feeling overwhelmed by all these figures, you might need to review our School of Pipsology lesson on How to Gauge Market Sentiment Using the COT Report in order to learn how to pinpoint potential forex market reversals.
And here is how positioning activity played out during the week ending on January 17, 2016.
As mentioned earlier, push-back against the Greenback was more broad-based, with only the pound and the euro losing ground to the Greenback.
The broad-based slide in Greenback demand was very likely due to Trump’s January 11 presser, as well as Trump’s January 13 interview with the Wall Street Journal. In short, positioning was mostly all about Trump.
In his January 11 presser, expectations were high that Trump would reveal some of the much-needed details on his fiscal stimulus plan.
However, Trump discussed a lot of other things and even gave the “fake news” media (*cough* CNN and BuzzFeed *cough *) a good verbal smack-down, but Trump didn’t really talk that much about the details of his fiscal stimulus plan. And disappointed traders dumped the Greenback as a result.
Trump’s January 13 interview, meanwhile, didn’t really catch the attention of most traders until the Wall Street Journal released a January 17 article that highlighted Trump’s statement that U.S. companies can’t compete with Chinese companies because “our currency is strong and it’s killing us.”
Other than those Trump-related catalysts, it’s likely that positioning activity also reflected sentiment shifts ahead of Trump’s January 20 inauguration.
Major events for the other currencies:
After trimming their net short bets on the euro during the previous week, large speculators decided to add some back during the week ending on January 17. Net change in positioning was very minimal, though.
But a closer look at positioning activity shows that both euro bulls and euro bears were actually unwinding their bets. Positioning activity on the euro very likely shows unwinding ahead of the January 19 ECB statement and presser.
Net bearish bias on the pound increased for the third week in a row. Similar to the euro, however, net change in positioning on the pound was also very small. In addition, pound bulls and pound bears were both actually trimming their bets.
This is quite interesting, given that the pound was very volatile during the January 16-20 trading week. Anyhow, the reduction in pound longs was likely because some pound bulls got spooked after The Telegraph and others leaked parts of Theresa May’s January 17 Brexit speech, which confirmed speculation that Theresa May plans to take the U.K. out of the E.U. Single Market.
The reduction in pound shorts, meanwhile, was likely due to profit-taking after the pound gapped lower following two weeks of broad-based weakness.
The yen took back even more ground from the Greenback. And this was very likely due to the plunge in U.S. bond yields, as well as the overall risk-off vibes at the time, which market analysts blamed on Brexit-related jitters and Trump’s comments about U.S. companies being unable to compete with China because of the strong dollar.
Swissy bulls and Swissy shorts but slashed their bets. There was no specific catalyst for the Swissy at the time. However, USD/CHF did fall hard after Trump’s presser and after the Wall Street Journal released its January 17 article that cited Trump as talking down the dollar.
It’s therefore possible that some Swissy longs were just taking profits off the table while some Swissy shorts just couldn’t take the pain no more.
After eight consecutive weeks of getting pushed back by the Greenback, the Aussie finally took back some ground from the Greenback. In fact, the net change in positioning was enough to push the Aussie back into bullish territory after three straight weeks of being in bearish territory.
Net positioning on the Aussie turned bullish thanks mainly to the reduction in Aussie shorts. This was likely due to Aussie shorts deciding that it’s time to stop the bleeding after week after week after week of Aussie appreciation, fueled mostly by a broad-based commodities rally.
After three consecutive weeks of retreating against the Greenback, the Kiwi finally regained some lost ground. The broad-based commodities rally also likely helped to improve sentiment on the Kiwi. Although Kiwi longs were also probably enticed to increase their bets after the
Although Kiwi longs were also probably enticed to increase their bets after the GDT price index rose by 0.6% during the January 17 auction after printing declines in the two previous auctions.
Both Loonie longs and Loonie shorts reinforced their respective positions. However, there were far more longs than shorts, so net bearish bias on the Loonie eased as a result.
And the likely reason for this is that more large speculators were likely betting that the BOC would be more upbeat during the January 18 BOC statement, give a string of
And the likely reason for this is that more large speculators were likely betting that the BOC would be more upbeat during the January 18 BOC statement, give a string of mostly positive economic reports for Canada. However, we now know that the BOC was anything but upbeat. Heck, BOC Governor Stephen Poloz even revealed that the BOC now appears to have an easing bias during the BOC presser.
Got any other conclusions you can draw from this latest COT Report?
Feel free to share your thoughts in the comments section or if you’re looking for further discussion, community member ForExchange has a lively thread called Trading based on Market Sentiment in the forums awaiting your participation.