Analys från DailyFX
COT: Euro Speculative Longs at Multi-Year High; Gold Longs at a Big Crossroad
What’s inside:
- Euro traders add once again to net long position, but reaches an extreme
- Gold large speculators add at critical juncture, could be fuel for selling if
- Australian dollar and British pound also see pause in recent trends in positioning
Find out what’s driving FX, equity markets, and commodities in our market forecasts.
The Commitment of Traders (COT) report released each Friday shows market positioning of futures traders as it stands for the week ending Tuesday. Shown in the table below are the net positions of large speculators (i.e. hedge funds, CTAs, etc.), the change from the prior week, and where the net position stands relative to its 52-week range.
Notable developments: Euro large speculators add to their net long position for a 5th week in a row. As we’ve noted before they have a good track record over the very long run of capturing trends in this particular currency, and as of last month went net long for the first time since May 2014. But while they have been good at identifying trends, extremes in positioning can also indicate points of exhaustion. At 74009 contracts, this is the largest net long position since May 2011. A turn lower, to at least alleviate the build-up of speculative longs, may soon be in order.
Gold large specs added to their long positions for a fourth week in a row, pushing it to the largest net position since the week of November 11. This came at a time when the price of gold pushed above the all-important 2011 trend-line on a daily closing basis. But for the three days to end last week, gold dropped back below and put in a key reversal bar on the weekly. The selling pressure will likely be reflected in this Friday’s report. As we’ve discussed recently, a weekly close above the long-term trend-line was viewed as the key event needed to put gold in the driver’s seat towards higher prices. Should we see further failure out of gold, the recently added longs could add fuel to a down-move as they unload losing positions.
The COT report is viewed as a longer-term indication of sentiment – for a shorter-term view on sentiment, check out IG Client Sentiment data and the guide on how to utilize this metric.
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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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