Jump to content

USD Longs Slashed, CAD Flips Net Long, No More Shorts to Fuel GBP/USD Rise


Recommended Posts

US Dollar, GBP/USD, USD/CAD COT Report –Analysis

  • USD Longs Slashed
  • CAD Flips Net Long, Asymmetrical Risks Increase
  • No More Short Squeeze Fuel for GBP

BUZZ-COMMENT-U.S. inflation is apt to disappoint and dollar dip | Nasdaq

USD Longs Slashed, CAD Flips Net Long, No More Shorts to Fuel GBP/USD Rise – COT Report

In the week through to January 14th, a third of net US Dollar long positions had been slashed having dropped $6.87bln. This marks the largest decline in USD exposure since June 2020 with net longs now at the lowest in four months. This somewhat underscores the fact that the US Dollar has seen a rather tame reaction to the repricing in the Fed’s outlook over the last two weeks, where the consensus is now for a March hike, followed by three additional hikes for 2022, alongside, quantitative tightening. Among the factors that have been behind the muted USD performance, despite risk appetite souring has been due to US equity outflows, particularly from the heavyweight tech stocks. Meanwhile, there is a risk at the upcoming Fed meeting that the Bank fail to match up to the lofty hawkish expectations and thus, should this be realised, the USD can be expected to pull back. Elsewhere, with geopolitical tensions surrounding Russia gaining traction, the Japanese Yen or Swiss Franc would be better options for playing the safe-haven trade.

Across the commodity currencies, traders flipped net long in the Canadian Dollar for the first time since November. The highlight for CAD will be Wednesday’s BoC meeting where markets are 80% priced in for a rate hike. However, what is interesting is the fact that the Reuters poll shows only 7/31 economists calling for a hike next week. As such, should the BoC raise rates, it is likely that there will be an initial spike higher, although, this could be somewhat limited given how aggressive money market pricing is for the BoC with 142bps of tightening priced in. In turn, my view is that there is an asymmetrical risk to the Canadian Dollar given the high bar to surprise on the hawkish side raises the risk of disappointment. That said, should we see risk appetite stabilise, I favour AUD over CAD.

GBP net shorts have been unwound, which had been providing much of the fuel for GBP upside in recent weeks. However, in light of the cleansing of positioning, the Pound may be more vulnerable to the increased political noise surrounding PM Johnson. This week will likely see the Sue Gray report released, which will be critical in dictating whether Boris Johnson stays on as PM or not.

image.png

Weekly FX Positioning

USD Longs Slashed, CAD Flips Net Long, No More Shorts to Fuel GBP/USD Rise

Source: CFTC, DailyFX (Covers up to January 18th, released December 21st)

The Analytical Abilities of the COT Report

How to Read the CFTC Report

US Dollar Positioning

USD Longs Slashed, CAD Flips Net Long, No More Shorts to Fuel GBP/USD Rise

Source: Refinitiv, DailyFX

USD/CAD Positioning

USD Longs Slashed, CAD Flips Net Long, No More Shorts to Fuel GBP/USD Rise

Source: Refinitiv, DailyFX

GBP/USD Positioning

USD Longs Slashed, CAD Flips Net Long, No More Shorts to Fuel GBP/USD Rise

Source: Refinitiv, DailyFX

If you would like to receive the full COT FX breakdown, contact IG.

 

Jan 24, 2022  |   Justin McQueen, Strategist. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,623
    • Total Posts
      91,867
    • Total Members
      41,901
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Okbill
    Joined 23/03/23 22:43
  • Posts

    • In general, I will start with the fact that I was looking for a cube would be possible to invest money to multiply Some bets, stock exchanges didn't really work for me. I decided to look for something really worthwhile. In general I got to cryptocurrency, studied it for a while and tried to get into it. Then I got interested in all sorts of nft, metaverse, and so on And then I found a quite interesting and fresh project It's called Sabai Ecoverse. There, and you can earn from zero, and multiply the capital. In general, I just started to get into it. Can you also look at and say your opinion, please
    • Markets Digest the Possibility of a Fed Pause and BoE Hikes 25 bps. The Thursday  Market Outlook with Richard Snow gives a report on the latest changes in the financial markets, providing timely fundamental, economic and technical analysis and a close examination of promising chart formations with live currency quotes which you can look forward to.    
    • The Securities and Exchange Commission (SEC) issued a so-called Wells notice on Coinbase which saw the stock down heavily after-hours last night on Wall Street.    Jeremy Naylor | Analyst, London | Publication date: Thursday 23 March 2023  This is a document indicating that the SEC is preparing to act against some parts of the business. IGTV’s Jeremy Naylor explains that as the story develops, and more is heard, traders will be able to make a better judgment. Coinbase shares plunge The crypto exchange Coinbase fell more than 22% yesterday late in the session, all-sessions on the IG platform, it trades outside of hours, and it was this trading that represented a big drop in the share price. Share price chart Let's take a look at what happened because it explains the situation quite well. We have subsequently this morning seen a little bit of a rebound, but that 22% drop came after the company was issued a so-called Wells notice by the Securities and Exchange Commission (SEC). The Wells notice is often one of the final steps before the SEC formally issues charges against the business, generally laying out the framework for what happens next. So we've got this drop that came through last night. We've subsequently seen a little bit of a rise on the session. CNBC said last night that based on discussions with the staff that potentially enforcement actions would relate to aspects of the company's spot market staking service, Coinbase Earn, Coinbase Prime and also the Coinbase Wallet business. Now the SEC is on high alert in the crypto industry in the wake of the failure of FTX. The recent gains we've seen in Coinbase have really all been about what's been happening with Bitcoin. Bitcoin has risen a whopping 47 and three quarter percent from the lows we had back on the 10th of March, all the way up to the highs we saw on Wednesday, yesterday, mid-session before the pullback. It's acting a little bit like a safe haven in the world of the markets. But Coinbase reflected this to some degree. But that knock yesterday was a really big pullback. But the investors are regrouping around the business and see this stock now up all-sessions, up 7% today. Where it'll open remains to be seen, but I suspect we could well see a little bit of a drop at the start later on today on Wall Street.
×
×
  • Create New...