COT Report – Analysis and Talking Points
The Predictive Power of the COT Report
Source: CFTC, DailyFX (Covers up to December 24th, released December 31st)
In the week up to December 24th, CFTC data showed that investors were yet again cutting back on their long US Dollar bets by $1.186bln against G10 currencies to $17.5bln. As such, bullish positioning in the greenback remains at its lowest level since mid-November.
The largest weekly positioning change had been seen in the Pound, in which speculators flipped to net long in the currency for the first time since mid-April, while net longs are now the largest since June 2018. This comes amid the continued reduction in Brexit uncertainty, particularly after the UK election with Boris Johnson set to take the UK out of the EU by the end of the month.
Sentiment in the Euro deteriorated further with net shorts rising over $10bln following a $950mln increase. That said, while bearish positioning is beginning to look stretched, with the Euro trading at its highest level since August at 1.1215, we see risks of a pullback to 1.1150. Elsewhere, positioning in the CAD saw a third consecutive weekly reduction in long bets, which may curb a further drop in USD/CAD
Across safe-haven currencies, a short squeeze in the Japanese Yen saw bearish positions cut by $970mln, with topside in USDJPY remaining limited to 109.50. The Swiss Franc saw a rather muted reduction in net shorts, which had been cut by $178mln to its lowest since September.
US Dollar
GBP/USD
USD/JPY
USD/CAD
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--- Written by Justin McQueen, Market Analyst
To contact Justin, email him at Justin.mcqueen@ig.com
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