Commitments of Traders

Speculators continue to be CAD bearish ( USDCAD bullish ) for a 3rd week in a row. This time they took some profits off the table. They covered 1.5K longs and 1.7K shorts. They were 31K net short, unchanged form the previous week. They clearly want to be CAD short. It is a fairly rare occurrence when the speculators find themselves on the wrong side of the trade. In this case, the price of USDCAD is dropping significantly while the speculators hold the other side of this transaction. It will be interesting to see what side will eventually prevails. In my view, the speculators will. It means the current downtrend in USDCAD is likely to fade soon?

Speculators took profits but they showed a strong bullish bias again. This week they covered both long and short positions but they closed out almost 3 times more shorts ( 9.7K ) than longs ( 3.5K). They were 40.3K net long. This is the highest level of net longs since 2014. The extreme level at that time reached 40K net long when the price collapsed from 1.71. We still have more room to go so the bias remains to the upside in the long term.

This week speculators turned from being net short back to be net long, exactly as I expected it to happen. This was next step in the pattern development I track. They added 15K new longs and dropped 3.3K shorts. This trade made them 18K net long, from being 779 contracts net short in the previous week.

There is a ST. Patrick’s weekend in Ireland. The charts below are last week’s. I can only update them tonight ( after 10pm ). unfortunately I will be travelling for the bank holiday weekend and I will not have an access to MT4 until Monday night. I will update the charts then. I’m sure most of you have our awesome COT indicator by now so you will be in the position to see the data.

Speculators were Yen bullish for another week. This time they they added 5.5K new longs and 4.2K new shorts. They were 86K net short, which is the LEAST BEARISH SINCE SEPTEMBER 2017. This is the 3rd consecutive week with speculators dumping Yen shorts.

USDJPY printed multi - year lows after President Trump announced tariffs last week. With FOMC voter Dudley calling four rate hikes gradual, the dot plot forecast will also be revised upwards. Based on these facts, USD/JPY should appreciate  but the rally would be short lived in my opinion. If China starts talking about their own tariffs or expresses less desire to buy U.S. Treasuries (again), USD/JPY will break 105. The downside comes as no surprise to us. My bias remains bearish.

Speculators are clearly not liking GBP futures these days! They covered 6.2K longs this week. This is 4th consecutive week when smart money is dumping long GBP. During this time they covered 37K of their longs, which account for 40% of all longs they held four weeks ago.They were 7.8K net long. This is the least bullish they have been since early December last year. Its a 3 months low! I wonder are they gearing up for something? BOE is fairly bullish on the economy, so the only thing comes in mind: Brexit disaster looming? 1.36 is likely

I have been expecting a top in this market for few weeks now. Double top + an engulfing candle could finally mark this top. This week speculators covered 20.5K longs and 7K shorts. This is very bearish sentiment from this group. Keep in mind that speculators covered 40K longs in the space of 3 weeks. It accounts for over 12 % of their total long positions.

Cable also topped – as expected. The pair formed an engulfing candle on daily and weekly charts, which is always a reliable bearish signal. The decline in GBPUSD is rather surprising considering that the BOE was very hawkish. In their Quarterly Inflation Report, the central bank upgraded their 2018 and 2019 GDP forecasts and said rates may need to rise earlier and faster than what they had seen in November. Despite that, Cable’s rally to 1.40 didn’t last and the pair closed the week at 1.3830

Speculators showed a strong Yen bullish bias last week. They added whooping 10.5K fresh longs and only 2.3K new shorts. They were 114K net short, down significantly from 122K in the previous week. They are still holding a large portion of the total open interest 62.5%, although it was down from the extreme levels of 66% - 70% was saw in the last few weeks. It suggests there are still plenty positions to be un-winded and the potential to the downside is still large.