Analys från DailyFX
COT: Euro Large Specs Long & Strong, CAD Traders Flip Long, Silver Selling Continues
What’s inside:
- Euro large specs increase net long towards record long
- Canadian dollar net position among large specs flips to net long for first time since mid-March
- Large silver traders take net long down to smallest in nearly a year; a flip short at long-term trend-line could be timely contrarian indicator
Check out the Q3 Forecasts for our outlook on currencies, commodities, and equity indices.
Every Friday the Commitment of Traders (COT) report is released, showing futures traders’ positioning as it stands for the week ending on Tuesday. In the table below are the net positions of large speculators (i.e. hedge funds, CTAs, etc.); the change in their positioning from the prior week and where the net position stands relative to its 52-week range.
Notable developments
Euro – Large speculators continue to add to their net long exposure, building towards the largest position since May 2011. The largest net long on record was recorded in 2007 at over 119k contracts. Overall, their position since flipping long back on the week of May 12 has been quite profitable with the euro gaining over 8 big-figures since. We noted back then the strong track record of the trend-following crowd and their ability historically to correctly identify trends in the single-currency. With the euro coming up on resistance and price becoming stretched, the recent build towards a record long may indicate in the not-too-distant future the trend in the euro is set to pause at the least, if not have a material reversal. Price action isn’t suggesting this to be the case just yet, but conditions are ripe for such an occurrence.
Canadian dollar – Back in early May when we looked at the record short position held by large specs we said, “It’s an extreme which suggests the trend may be saturated and ripe for a reversal.” Since then CAD has turned aggressively higher versus USD and with it the market has been covering their record short at a feverish pace. As of last week, the net position flipped to net long for the first time since March. Perhaps this won’t turn out to have been the timeliest flip given how far CAD has rallied and resistance not far ahead.
Silver – No other market has seen a bigger relative unwinding than the one in progress in the silver futures market. The decline since April spurred large speculators to take their net position down from a record 103k contracts to only 9k. It’s the smallest long position in nearly a year, and while we haven’t seen a net short position since as far back as April 2003, with more pressure on the precious metal we could get there in the not-too-distance future. With a 14-year trend-line not far below, a flip to net short after unwinding an enormous long position may present a timely contrarian indicator.
The COT report is a longer-term sentiment indicator – for a short-term view on sentiment, check out IG Client Sentiment data.
Other futures contracts and large speculator positioning:
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—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
What’s inside:
- EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
- Resistance in vicinity of 11825/80 likely to keep a lid on further strength
- Targeting the low to mid-11600s with more selling
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Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.
Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.
Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).
Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.
For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.
EURUSD: Daily
—Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email bysigning up here.
You can follow Paul on Twitter at@PaulRobinonFX.
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.
GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher’s e-mail distribution list, please fill out this form
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