US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply


COT Report – Analysis and Talking Points

  • US Dollar Longs Cut to Lowest Level Since June 2018
  • GBP/USD Bulls at Risk of Dovish Repricing
  • Investors Boost CAD Longs

The Predictive Power of the COT Report

How to Read the CFTC Report

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

Source: CFTC, DailyFX (Covers up to January 7th, released January 10th)

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US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply – COT Report

The first week of 2020 saw speculators cut their long exposure to the US Dollar to its lowest level since June 2018. This followed a sizeable reduction of nearly $6bln in USD net longs to $9.172bln with the Euro, CAD and JPY the main beneficiaries.

A dramatic shift in sentiment seen in the Euro as investors cover their bearish bets with net shorts cut by $1.8bln. However, despite the notable reduction in net shorts, the currency remains overwhelmingly the largest short in the G10 complex, while investors have also refrained from increasing their gross longs. Elsewhere, GBP net longs continued to pick-up, however, given the recent dovish shift by BoE officials, near-term repricing of easing bets are likely to put the Pound at risk of a marked pullback.

Safe haven currencies were in strong demand, particularly the Japanese Yen amid the escalation in tensions between the US and Iran as overall net shorts were cut in half to $1.4bln. Although, keep in mind that this had been prior to the de-escalation in tensions, given that the data captures up to January 7th and thus safe-haven flows would have likely been unwound. Elsewhere, positioning in the Swiss Franc is relatively neutral, however, we favour a pullback in the recent CHF strength against the Euro and USD.

Across the commodity currencies, Canadian Dollar net longs saw a sharp increase of $1.1bln to $2bln (largest since November) as investors covered their shorts, alongside raising their gross longs. Bearish bets in the Australian Dollar were notably reduced by $821mln. However, with eyes firmly fixed on the upcoming Australian inflation and jobs data, renewed selling may follow on weaker than expected figures.

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US Dollar

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

US Dollar Net Longs Cut to 6-month Lows

EUR/USD

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

Euro Net Shorts Slashed, However, Remains the Largest Short in G10 Complex

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

GBP/USD

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GBP/USD Bulls at Risk of Dovish Bank of England

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

USD/JPY

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

Safe-Haven Flows Spark Demand for Japanese Yen

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

USD/CHF

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

Swiss Franc Positioning Relatively Neutral

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

USD/CAD

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

Sharp Increase in Bullish Canadian Dollar Bets, Largest Since November 2019

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

AUD/USD

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

AUD/USD Bearish Bets See Modest Reduction, However, Weak Data May Prompt Renewed Selling

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

NZD/USD

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

NZD/USD Positioning Flat, Investors Raise Gross NZD Longs

US Dollar Longs Cut, GBP/USD Bulls at Risk, CAD Longs Rise Sharply  - COT Report

For a more in-depth analysis on FX, check out the FX Forecast

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX





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