The biggest long exposure belongs now to the GBP

The latest data for the weekly Commitments of Traders (COT) report, released by the Commodity Futures Trading Commission (CFTC) on Friday, showed that the ongoing bearish JPY position continues to be the broader theme. It also displayed that there is another theme of bullish sentiment towards the European currencies GBP, EUR and CHF which were the strongest of the majors. The dollar-bloc seemed to tire with neutral sentiment towards AUD, CAD and NZD, and also USD where speculators decreased their overall bullish bets to a flat position.



It has been about a 10k contract reduction in EUR to display the net long 23k contracts has now. Despite being the second largest gross long position among the majors, this closing of EUR long positions was one of the largest week‐over‐week change the most recent of a three week straight dropping of the net positioning. A combination of low inflation rates and a relatively high exchange rate and the ECB's reaction to it, appears to have been the main culprit.

The biggest long exposure belongs now to the GBP which saws continued buying during the past four weeks. The long exposure is now paring the peaks of December 2012 (27.6k) and March 2011 (34.7k) in the futures only data series. A record figure is seen in the gross long number among non-commercials which is now at 91.6k experiencing a +15k acceleration in the most recent data.



Both long and short JPY positions were scaled back due to risk aversion up to the time of data release but not so much as to threaten the support located at the 101.00 figure. The gross short yen positions is similar to the previous week (1st April) and prints -87.4k contracts. Still, the yen's gross short position is the largest among majors. The negative bias may be reduced in the next CFTC report if the USD/JPY reports a direct loss of immediate support due to current risk aversion climate. FXStreet's COT oscillator shows the building of a base and an intent of leaving the oversold zone.



The net speculative Australian dollar futures position climbed to the long side (3.3k contracts from -4.8k) and so technically the bias turned bullish for the first time since May 2013.; But still this is a small position which does not necessarily imply a continuation of the current upward move.



According to CFTC, speculators are also reducing the net short in the Canadian dollar futures with a similar move as the Australian dollar, but the net positioning is still in the negative (-34.3k)

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What does it mean for traders? Accordingly to FXstreets weekly poll, the consensus forecasts on a 3-month horizon is for depreciation. However, the position data from CFTC is telling us the opposite, creating here an interesting dynamic to trade the EUR/USD. On the other side it is tempting to look for the greenback's losses to accelerate given the technical damage inflicted on the dollar and the recent decline in US interest rates.
The shift out of EUR to GBP can also be used to trade the EUR/GBP cross in the short-term, but don't loose attention to the fact that the theme is about European currencies right now. The net long at GBP is making a new high coupled with an OI which continues to grow. Although this can be considered a confirmation of trend strength, the exchange rate failed to rise above the high at 1.6820, a case for divergence between the data, which would imply an appreciation of the cross rate.


About Commitments of Traders
The weekly Commitment of Traders report summarizes the total trader positions for open contracts in the futures trading markets. The CFTC categorizes trader positions according to commercial hedgers, non-commercials (also called speculators) and nonreportable traders (usually small traders/speculators). The report is published every Friday and shows futures positions data that was reported as of the previous Tuesday.