Large speculators reduced the net value of their net long bets on the Greenback for the sixth consecutive week. This time from $17.07 billion to a four-month low of $14.99, according to calculations done by Reuters. And the latest Commitments of Traders forex positioning report from the CFTC shows that the pushback on the Greenback is still broad-based.
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 February 14, 2017.
The value of net long bets on the Greenback got pared for the sixth week running, as of the week ending on February 14, 2017. This is rather interesting because the most recent COT report shows how the big players were positioned after Trump said that he will be announcing “something phenomenal in terms of tax” during a February 10 speech and after Fed Chair Yellen said that “waiting too long to remove accommodation would be unwise” during her February 14 testimony before the Senate Banking Committee. This probably means that the big players were not really that convinced by Trump’s fiscal plans, as well as Yellen’s signalling of a possible March rate hike.
Okay, aside from yet another week of perceived inherent unattractiveness on the part of the Greenback, here are the major events for the other currencies:
EUR – The euro finally retreated after advancing for three straight weeks against the Greenback. The slide in euro demand was likely due to a string of disappointing economic reports for Germany and the entire Euro Zone. For example, industrial production in the Euro Zone fell 1.6% month-on-month between November and December, which is the sharpest fall since January 2014. Other than those, political uncertainty in Europe, particularly with regard to German and French elections, also likely sapped demand for the euro.
GBP – Net change on positioning on the pound was small, but the pound did lose ground to Greenback for the second consecutive week, thanks to more fresh shorts compared to fresh longs. And there were more fresh shorts than longs probably because the January readings for the U.K.’s CPI missed expectations, with the headline reading printing a 1.8% year-on-year increase, a tick lower than the 1.9% consensus. Despite the miss, however, December’s reading is still faster than December’s 1.6% and the highest reading since June 2014 to boot, which is probably why some bulls were enticed to jump in. Do note, though, that the COT report does not yet reflect positioning activity after the U.K.’s disappointing jobs report and poor retail sales report were released.
JPY – The yen advanced against the Greenback for the seventh week in a row. And positioning activity was very bullish because yen bulls added to their bets while yen shorts got pared. Yen shorts got trimmed likely because of profit-taking after global bond yields surged and the yen dropped when Trump announced “something phenomenal in terms of tax” during a February 10 speech. The additional yen longs are kind strange, though.
CHF – Bearish bias on the Swissy eased, thanks to a large reduction in Swissy shorts, which likely reflects the prevalence of risk appetite at the time.
AUD – Aussie longs and Aussie shorts further reinforced their respective positions. And like the last couple of times, far more longs were added than shorts, so the Aussie pushed the Greenback back once more. The increase in net long bets on the Aussie was very likely due to RBA Governor Lowe’s comment that “It’s hard to say that the exchange rate is fundamentally too high,” since that is the opposite of the RBA’s usual talking of the Aussie dollar when the RBA says that “An appreciating exchange rate would complicate this adjustment” in the Australian economy.
NZD – Both long bets and short bets on the Kiwi got increased. However, there were more fresh longs than shirts, so the Kiwi advanced against the Greenback for the fourth consecutive week. Positioning activity on the Kiwi is rather strange, particularly the fresh longs, since the RBNZ chose to switch to a neutral policy bias, which caused both spot and NZD futures to fall. Risk appetite was the dominant sentiment during the week ending on February 14, though, and that possibly fueled demand for the Kiwi.
CAD – Non-commercial forex traders ramped up their Loonie longs while culling their Loonie shorts. As a result, the Loonie had the largest net change in positioning during the week ending on February 14. This very bullish positioning activity was very likely due to Canada’s upbeat January jobs report, as well as optimistic speculation that Canada’s trade won’t suffer as much under a Trump presidency after Trump announced that he had a “wonderful” meeting with Canadian PM Trudeau.
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.