The Weekly Commitments of Traders Report
Know what the “smart money” is up to
The Commitments of Traders Report is issued by CFTC.
It reports all open positions in futures markets of three main groups of traders:
- Commercial Traders – Hedgers
- Non-Commercial Traders – Money Managers
- Non-Reportable – Retail market
The report breaks down each Tuesday’s Open Interest and gives us a powerful view on what exactly the big guys have been doing in the marketplace and what their plans might be.
It is issued every Friday and includes data from Tuesday to Tuesday.
The three days prior to the release date are not included.
This is an essential tool for gauging long term sentiment in futures markets.
In this report, we cover EURO, GBP, AUD, JPY, CAD, and we focus on Non-Commercial traders as an indication of a profit driven bias.
EURO – Euro Futures
My Bias: Bearish
Following Fed Chair Powell’s remarks Friday, at the Jackson Hole Symposium, for a second consecutive week, USD suffered its largest drawdown in the past six months . While Powell made the case for continued rate hikes, he stopped short of dialing up any further hawkish rhetoric beyond the established status quo.Ahead of the weekend, the euro rose to its best level since August 2. Explanations that seek to attribute the euro’s rise Trump’s offer to buy Italian bonds or Powell’s comments seem like post-hoc rationalizing. The euro has closed higher for seven of the past eight sessions. My long term bias remains short but the bullish price action is in conflict with speculative bearish positions.
The speculators became net short in EUR futures two weeks ago. This is the first time since May 2017 when speculators hold more short positions than long. This week they added further 3.5K fresh shorts and only 479 longs. This is a clear bearish bias and suggests more downside in EURUSD is possible. Other metrics do not look over extended and it seems like the price and the speculative positions still have plenty room to go before they get extreme.
Sell EURUSD on rallies to the resistance.
GBP – British Pound Future
My Bias: Bearish GBPUSD long term
In recent weeks, we have seen significant weakening of the (Great) British-pound (GBP) against most of is trading counterparts. Recent bear technical price patterns in GBPUSD, GBPNZD, GBPAUD and GBPCHF, suggest the GBP bear trend in these pairs is likely to gather steam into the fall.
My bias is long term bearish
And the speculative position confirm the bearishness in this market. This week speculators added1 9.6K fresh short positions and only 8K longs. They were 72K net short, which is the largest level since they became net bearish back in June. Speculative shorts are slowly getting extreme. The last extreme level that caused the market to reverse from 1.20 to 1.44 was at 144K ( April 2017 ). We are almost at these levels ( 140K ) this week. The missing element is the share of open interest. This metric reads 52% this week. We know the GBP futures tend to reverse the trend when the share of Open Interest reaches over 60% in this particular market. If speculators add more shorts next week on falling open interest, it will be a perfect long signal for GBPUSD. Lets see
Still no change: There could be some short term upside potential but the longer outlook remains to the downside
JPY -Japanese Yen Futures
My Bias: Mixed USDJPY
The Dollar/Yen settled higher last week, while posting a dramatic closing price reversal bottom. The price action suggests a shift in investor sentiment. The market reached its low last week on expectations of a September rate hike after the Fed minutes and speech by Fed Chair Jerome Powell strongly suggested the strong economy means the Fed will continue with its gradual rate hikes. The weak inflation data out of Japan overnight also pressured the already weakening YEN. The core CPI figure came in at a lacklustre 0.8% y/y clip, the same rate as June and disappointing the median forecast for a 0.9% reading. This might suggest more upside in USDJPY but the pair is likely to be capped at the resistance at 113. Speculative positions are getting bullish despite a rally.
This week speculators added fresh 4.7K longs and covered 6.2K short positions in JPY futures. They were 47K net short, drastically down from being 58K in the previous week and 62K two week ago. This suggests, USDJPY might be capped at 113.00 and roll over to the downside in the longer term.
My analysis from the previous week stands valid:
This is significant and suggests the change in trend is about to take place. Historically, the trend reversed when the speculators held around 70% of the total open interest in either longs or shorts. Each time the market took a “ U turn” for a long term. It worth noticing that the same dynamic is taking place currently. It is also worth noticing that the net positions are now at the 33 weeks moving average, which also suggests the price to continue to drop.
Reasons for USDJPY to delince:
Share of open interest is getting extreme
USDJPY is trading a t the resistance
USDJPY printed a massive engulfing candle last Friday
Trump prefers cheaper Dollar going forward
Strategy – no change:
Sell USDJPY on rallies towards the resistance
AUD -Australian Dollar Futures
My Bias: mixed AUDUSD
The new Prime Minister lifted the political uncertainty and prevented the Australian dollar from falling to fresh yearly lows but the weakness in iron ore and copper prices are also weighing on the unit and could renew its slide in the week ahead as there are no Australian economic reports scheduled for release. My bias is still mixed but I would like to be looking at the long side after last week’s rally.
The positions didn’t change much this week. Speculators took profits and covered 121 long and 1.6K short positions. They were 50.2K net short, slightly changed form 51.7K in the previous week.
AUDUSD is currently tracing in a range between 0.75 and 0.73. Bearish positions are getting extreme and the price could find a lot of support from the current level. My bias is mixed but I am leaning towards long side on this one.
CAD – Canadian Dollar Futures
My Bias: bullish USDCAD
The Canadian currency has shown significant volatility this week and dropped 0.62% on Thursday. The decline was in response to another wave of tariffs between the U.S and China, which took effect on Thursday. The tariffs, valued at $16 billion, kicked in despite the fact that the parties were holding low-level trade talks at the same time. As expected, the talks did not yield any breakthrough. The escalation in trade sanctions is bad news for the export-reliant Canadian economy and is also weighing on investor risk appetite for minor currencies like the Canadian dollar. If the U.S slaps further tariffs on its trading partners, the Canadian dollar will be sailing into significant headwinds.
Speculators added fresh 1.6K longs and 2.4K shorts this week. This has not changed their sentiment from the previous week. They were 27K net short, compared to 26.2K in the previous week.
No strategy for now
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