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
      22,978
    • Total Posts
      95,287
    • Total Members
      43,586
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    aroyi
    Joined 22/09/23 03:49
  • Posts

    • Stock market analysis and trading strategies: NASDAQ,QQQ, Apple (AAPL),Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), Microsoft MSFT, Meta Platforms, Netflix (NFLX), Alphabet GOOGL  Stock Market Summary: Further downside to complete the Wave c) of 4 correction (Indices) There are two different patterns for stocks, the stocks that have just topped like Alphabet, Amazon, Berkshire Hathaway are in their Wave a) of 4 and the other stocks are in the Wave c) of 4, that said Apple is slightly different, but can be tied into the Wave c) of 4 patterns. Trading Strategies: Short side Video Chapter 00:00  NASDAQ 100 (NDX) / QQQ / Berkshire Hathaway 06:27 Apple (AAPL) 07:34 Amazon (AMZN) 08:54 NVIDIA (NVDA) 10:08 Meta Platforms (META) 14:07 Netflix (NFLX)  15:37 Alphabet (GOOGL) 17:26 Microsoft MSFT 21:27 Tesla (TSLA) 24:45 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge.com     
    • The "best" percentage of your investment portfolio to allocate to cryptocurrencies depends on your individual financial situation, risk tolerance, investment goals, and time horizon. There is no one-size-fits-all answer to this question, as what's appropriate for one person may not be suitable for another. Here are some considerations to help you determine the right percentage for your situation: Risk Tolerance: Cryptocurrencies are known for their price volatility. Consider how comfortable you are with the possibility of significant price fluctuations. Generally, if you have a lower risk tolerance, you may allocate a smaller percentage to cryptocurrencies. Financial Goals: Your investment goals play a crucial role in determining your crypto allocation. Are you investing for short-term gains, long-term growth, or a specific financial milestone (e.g., retirement)? The time horizon for your goals can influence your crypto allocation. Diversification: Diversification is a risk management strategy that involves spreading your investments across different asset classes. Diversifying your portfolio can help reduce risk. Experts often recommend not putting all your funds into a single investment, including cryptocurrencies. The specific percentage you allocate to crypto should consider the diversity of your overall portfolio. Knowledge and Research: Your understanding of cryptocurrencies matters. If you're well-versed in the crypto space and have confidence in your ability to evaluate and manage crypto investments, you might allocate a higher percentage. However, if you're new to cryptocurrencies, it's wise to start with a smaller allocation until you gain more experience. Financial Situation: Consider your current financial situation, including your income, expenses, and existing investments. Ensure that you have an emergency fund and meet your other financial obligations before allocating a significant portion to cryptocurrencies. Regulatory and Tax Considerations: Be aware of the regulatory and tax implications of cryptocurrency investments in your jurisdiction. Tax laws regarding cryptocurrencies can vary significantly, and it's essential to comply with them. Asset Allocation Strategy: Many financial experts recommend following a structured asset allocation strategy based on your risk tolerance and investment goals. This strategy might suggest a certain percentage for different asset classes, including stocks, bonds, real estate, and cryptocurrencies. Regular Review: Periodically review and rebalance your portfolio to ensure it aligns with your goals and risk tolerance. Cryptocurrency prices can change rapidly, so your allocation may need adjustments over time. Ultimately, there is no universally "best" percentage to invest in cryptocurrencies. It's a highly individual decision that should be made based on your unique circumstances and objectives. It's also important to conduct thorough research and consider seeking advice from a financial advisor or investment professional before making any significant changes to your investment portfolio.
    • Can orsted shares be purchased on the platform?
×
×
  • Create New...
us