The big players slightly bumped up their net long positions on the Greenback since the value of net long bets on the Greenback rose from a 9-month low of $7.53 to $8.00 billion, according to calculations done by Reuters.
However, the latest Commitments of Traders forex positioning report from the CFTC shows that positioning activity was mixed, with the Greenback taking ground mainly from the pound, the yen, and the Aussie dollar while losing ground to the rest, primarily the Kiwi and the Loonie.
Oh, please keep in mind that the numbers below show the net positioning of non-commercial forex traders against the U.S. dollar.
And 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 June 6, 2017.
Positioning activity was mixed. And that implies that demand (or lack thereof) for the other currencies was likely driving positioning activity.
And while both economic reports were disappointing, both reports were not able to derail expectations for a June rate hike, which is likely why demand for the Greenback didn’t take a broad-based hit during the week ending on June 6.
Another possible reason for the mixed positioning activity and relatively small increase in the value of net long positions on the Greenback, is that the market was uncertain as to how Ex-FBI Director Comey’s testimony would turn out. Of course, we now know that Comey’s testimony was rather underwhelming for those who are hoping and praying for a chance to impeach The Donald.
Anyhow, here are the major events, reports, and other catalysts for the other currencies:
The euro advanced against the Greenback for the seventh consecutive week, probably because of easing worries over Greece after Greek Finance Minister Euclid Tsakalotos invalidated rumors that Greece was planning to opt out of receiving more bailout money, as well as rumors that ECB officials are supposedly “set to take a more benign view of the economy when they meet on June 8 and will even discuss dropping some of their pledges to ramp up stimulus if needed.”
Interestingly enough, euro bulls actually cut down their positions, which may just be profit-taking ahead of the ECB statement since price action does not yet reflect ECB-related rumors about a possible downgrade to the ECB’s inflation outlook.
And we now know that those rumors were right since the ECB did downgrade its inflation outlook. However, the ECB also upgraded its growth outlook and removed its easing bias on interest rates, although the ECB also stressed that it still has an easing bias on its QE program.
The pound got pushed back for the second straight week. Also, positioning activity on the pound was rather bearish since bulls trimmed their bets while bears reinforced their positions.
And this bearish positioning activity was very likely a reaction to the Conservative Party’s shrinking lead in the polls ahead of the U.K. General Elections.
And we now know that Theresa May’s Conservative Party was unable to capture the needed 326 seats in order to have a majority government.
Like the pound, the yen also retreated from the Greenback for the second straight week. And souring sentiment on the yen was due mainly to yen bulls slashing their net long bets, which is rather weird because the geopolitical risks at the time should have boosted demand for the safe-haven yen.
However, it’s possible that yen bulls were just unwinding their bets to take some profits off the table. After all, yen spot and yen futures appreciated in the aftermath of the FOMC meeting minutes and continued to do so during the week ending on June 6, 2017.
Sentiment on the Swissy improved for the third week in a row. However, a closer look at positioning activity shows that both Swissy bulls and Swissy bears were culling their positions. It just so happens that more bears were abandoning ship than bulls.
Positioning activity on the Swissy is actually similar to that of the euro’s, probably because traders have noticed that the Swissy’s positive correlation to the euro has apparently returned.
The Aussie resumed its retreat after standing up to the Greenback during the previous week. And the Aussie lost ground mainly because Aussie bulls pared their bets, probably because they got spooked by the plunge in iron ore prices at the time, as well as Caixin/Markit’s Chinese manufacturing PMI reading of 49.8, which is a miss and the first reading below the 50.0 stagnation level in 11 months to boot.
Positioning activity is still very bullish, with Kiwi bulls adding to their positions while Kiwi bears trimmed theirs.
Demand for the Kiwi was likely sustained by ANZ’s commodity price index since it showed that dairy prices increased by 3.8% month-on-month in May. Also, the GDT price index rose by 0.6% increase in the most recent dairy auction.
These two developments reinforce Fonterra’s report, which had a rather upbeat outlook on dairy prices. And as you should all probably know by now, dairy products account for the bulk of New Zealand’s exports.
Sentiment on the Loonie improved further. And very interestingly enough, net change in positioning was driven mainly by fresh longs on the Loonie. Maybe more Loonie bulls got enticed to jump in when the BOC didn’t sound too worried during the latest BOC statement?
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.