Analys från DailyFX
COT: Euro Speculative Longs Increase, CAD Shorts Add to Record Position
What’s inside:
- Euro speculators increase long position; historically good track record for catching trends
- Canadian dollar speculative shorts grow further into record territory
- Gold traders decrease long holdings for third consecutive week
Find out what’s driving FX, equity markets, and commodities in our market forecasts.
On Friday, the weekly Commitments of Traders (COT) report was released, which shows positioning in the futures market, with the reporting week ending on Tuesdays. Recently there have been some notable changes.
Euro futures, for example, showed large speculators (i.e. – hedge funds, trend-followers) flipping from net short to net long two weeks ago, and further adding to their long exposure a second week in a row. This is the first time this group of market participants, in aggregate, have held a net long position since May 2014. Three long years holding short, which turned out to be the correct view. Actually, over the years large specs have had a pretty good track record of catching trends in the euro.
Let’s look at a simple trend-following system which establishes a long position when large speculators turn net long and a short position when they flip their position net short. Going back 14-years this has yielded about a 107% gain (excluding transaction costs and slippage). There were quite a few false signals (a common characteristic with trend following systems) and a few large drawdowns, but overall when a sizable trend emerged large specs have been on the right side.
The recent flip to a long position could very well be a long-term false signal, but we have to consider the possibility that they are onto yet another sustainable move. It’s early, but for now they are on the right side.
(*It’s worth noting, that the trend following system outlined does not have a great track record for many other currencies and markets. Large specs do OK in some, while others it’s a net negative effort. The best results among markets examined were in euro futures.)
*Past results are not indicative of future performance.
Below are graphs of various other currencies and commodities overlaid with the net positioning of large speculators. We start with the Canadian dollar, which for a second week in a row moved further into record territory, with 98000 contracts held short. It’s an extreme which suggests the trend may be saturated and ripe for a reversal.
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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.
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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
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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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