FX COT Update: Sterling Shorts Soar To New Highs
This data references the period ending October 4th.
EUR/USD
Non-Commercials increased their net short positions in the Euro last week selling a further 6k contracts to take the total position to SHORT 82k contracts. The resumption of selling in EUR reflects the choppy position currently strangling price action with two weeks of inflows and two weeks of outflows over the last month. ECB easing expectations have been sidelined for now amidst positive data over recent months.
However, investor uncertainty threatens to add volatility on concerns linked to concerns for the EuroZone banking sector alongside fresh developments in the Brexit landscape. The US Dollar fell back last week on a disappointing September NFP print which was below expectations at 156k vs. 174k expected with the Unemployment rate having increased over the period also. Traders now await Wednesday FOMC meeting minutes though the event is unlikely to result in support for the US Dollar given the weak employment readings.
GBP/USD
Non-Commercials increased their net short positions in Sterling last week selling a further 10k contracts to take the total position to SHORT 97.5k contracts. This latest wave of selling in Sterling comes amidst UK PM May’s confirmation that the UK will officially trigger article 50, and thus begin the EU exit process, by the end of March 2017 at the latest. The announcement caught many offsides and investor uncertainty saw Sterling under heavy pressure despite a third consecutive month of positive PMI readings in the wake of Brexit.
Selling escalated on Friday when a flash crash was triggered during thin overnight liquidity conditions which saw GBPUSD drop 6% in a minute before quickly reversing the move. Selling is thought to have initiated in response to comments made by French PM Hollande who urged the EU to take a tough stance on the UK during Brexit.
USD/JPY
Non-Commercials reduced their net long positions in the Japanese Yen last week selling 0.2k contracts to take the total position to LONG 69k contracts. The muted change in JPY positioning reflects a migration of market focus away from the BOJ and JPY path on to other matters such as European issues and US election/ Fed concerns.
Japanese Yen has weakened somewhat recently which has taken some pressure off the BOJ for now with USDJPY having pulled away from the key 100 level. Risk sentiment remains supported driven by higher Oil prices which have seen a reduction in JPY safe haven demand.
USD/CHF
Non-Commercials reduced their net short positions in the Swiss Franc last week buying 3k contracts to take the total position to SHORT 3k contracts. Positioning in the Swissy has fluctuated quite a lot recently with a lack of clear drivers for any directional moves.
The SNB kept policy on hold though retain a clear easing bias. However, markets are skeptical of the bank’s ability to lower the exchange rate. Risk sentiment remains a key determinant with the Swiss Franc supported during times of risk aversion and weaker when risk markets are rising.
AUD/USD
Non-Commercials increased the net long positions in the Australian Dollar last week buying a further 9k contracts to take the total position to LONG 24k contracts. This latest wave of buying in the Aussie reflects continued to demand the for the currency which has a comparatively high yield among the G10 space and remains an attractive carry destination.
The Aussie has been relatively unscathed by recent commodity weakness and continues to perform robustly against the US Dollar fuelled by positive data prints. A lack of key domestic data this week turns traders’ attention to data from Australia’s largest trading partner, China.
USD/CAD
Non-Commercials increased their net short positions in the Canadian Dollar last week selling afurther 2.5k contracts to take the total position to SHORT 14k contracts. The Canadian Dollar has come under renewed pressure recently despite firmer Oil prices as interest rate differentials keep CAD weighed down.
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