Analys från DailyFX
COT: Euro Large Specs May Be Running Out of Buying Power
What’s inside:
- Euro large speculators buying pressure wanes, could indicate trend exhaustion soon
- Crude oil large specs continue to hold large long position despite limited upside
- Charts of large spec positions in other major currencies, markets
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Each week on Friday the CFTC releases the Commitment of Traders (COT) report, which shows traders’ positioning in the futures market as it stands for the week ending on Tuesday. Displayed 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 compared relative to its 52-week range.
Noteworthy developments
Euro – Large speculators in the single-currency made a timely flip from net short to net long back in May, and in aggregate, as they have many times in the past, caught a large chunk of the multi-month move (a tendency we discussed at the time of the flip). Buying pressure has waned in recent weeks while the net long position built towards record levels. Since the week of July 21 long contracts held by large specs has declined from 91k contracts to 88k. We could be reaching a saturation point; how much buying power is left to sustain the current trend? With long-term resistance in the vicinity, the euro may be setting up for a scenario where we are seeing buying pressure dry up and a material correction or worse soon sets in. There are certainly plenty of speculative longs to help drive price lower should they start unwinding in earnest.
EURUSD: Monthly
Crude Oil – Large speculators reduced their net long position for a second week in a row, but it still remains at historically high levels. During the bounce starting back in June, trend-followers quickly snatched up contracts despite oil prices remaining relatively stagnant for over a year. Sure, there have been plenty of sharp price swings, but it’s amounted to essentially nothing for quite some time. Should WTI start gaining downward momentum with limited bounces, there is plenty of supply (futures contracts) to be unloaded. For crude to sustain higher levels a wash-out of longs looks likely to be needed.
Crude Oil: Weekly
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
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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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