Commitments of Traders
Open interest came out at 178K, which is a pretty low level. GBP open interest peaked few times this year at 260K level. This means, there could be over 100K new transactions to be added to this market. Given speculators just turned bullish, I would expect they will be a main driver of this bull market in the next few months.
Cable also held up to last week’s gains and closed the week above 1.33 mark. This week so far GBPUSD is trading above this level, which is a very bullish sign and likely to attract new buyers. Speculators were almost back to be net bullish. My bias remains to the upside with target at 1.36
The last three weeks of adjustments suggest that speculators are much less bullish in CAD futures. During this time, they reduced their longs by 26K, which accounts for over 12% of all long positions. This is likely to push USDCAD higher in the coming weeks.
Meanwhile, speculators , after being rather bearish two weeks ago, took profits on their short positions and become net long once again. Keep in mind the figures in this week’s report are compiled on Tuesday before BOE announcement. Smart Money did not expressed any interest in long positions and covered 680 long contracts. This week’s data is not bullish as such but definitely speculators are not betting on lower Pound post BOE decision and policy stance going forward. My bias remains long.
This week speculators were very stretched from all angles in JPY Futures. For starters they added fresh 5K longs, but t at the same time, they added whooping 20K shorts. They were 116K net short. This is the highest level since July. It brought Open Interest to 282K, highest since December last year. They held almost 63% of the total Open Interest in short. THIS IS EXTREME and suggest reversal.
USDJPY advanced higher and broke the resistance at 113.30. The pair closed the week at 113.50, which is the highest level since mid July 2017. At this stage the price is likely to carry on higher towards the next logical resistance at 114.50.My bias at this stage is flat but I would still expect USDJPY to have limited upside and trade lower in the coming weeks.
Speculators were rather bullish this week but pushed their net longs to extreme levels. They added large amount of long positions 8.7K and at the same time added 1.5K . They were 98K net long, the highest since 2007! Open interest also remains close to the extreme levels. Speculators held 43% of total Open Interest in longs this week. Despite the extreme levels of net positions, speculators are not highly leveraged in longs yet. The last time ( Oct 2016 ) the price reversed, speculators held almost 60% of the total Open Interest in shorts. It seems like there is still room to add more longs before the price reverses.
Speculators, after becoming net bullish on GBP last week, covered another 14K of their shorts last Tuesday. Despite sharply falling prices, speculators are getting rid of their short positions with a bang. In the last 3 weeks they covered 54K shorts, which accounts for 40% of their all shorts held 3 weeks ago. They were 19K net long, up from 5K in the previous week and being net short two weeks ago. Open interest have been falling sharply in the last 3 weeks. This would suggest that the current decline in GBPUSD is a correction and not a trend reversal.
And finally speculators became net long in GBP Futures. This week they covered 11K shorts and added 3.6K new longs. They were 5K net long. This is the first time since Oct 2015 that speculators are net long in GBP Futures. Given uptrending price action, this is a very bullish signal for the British currency. COT analysis had proven many time before the net short/long switch in sentiment among speculators is a clear beginning of a new price trend. Speculative long positions accounted for 41% of the total Open Interest so there is plenty room for the price top go up until the tipping point of 63% is reached. It time to buy GBP!
This content is for members only