Weekly COT Report

Matt Simpson, CFTe, MSTA CityIndex

A summary of the weekly Commitment of Traders Report (COT) from CFTC to show market positioning among large speculators.

EUR traders extended their net-short exposure to their most bearish level since December 2016
Traders continue to bet on low volatility, with the VIX net-short exposure at its most bearish level since
WTI net-long exposure its most bullish since October
JPY traders are their most bearish on the yen this year

EUR: Whilst net-short exposure is its most bearish since December 2016, it’s worth noting bearish exposure was pushed marginally lower on reduced volumes last week. And, as EUR/USD has rebounded from long-term support, we have to consider the potential for bearish exposure to be reduced whilst prices remain elevated relative to positioning.

VIX: Several reads points towards the potential for a sentiment extreme (ie an inflection point). The 3-year Z-score is -2.8, so nearly 3 standard deviations from its mean. Net-short exposure is its most bearish since October 2017 and, adjusted for open interest, its most bearish since 2009. Nailing an actual turning point can prove tricky, but if we cast our minds back to Feb 2018, when ‘short vol’ wants to reverse, it comes hard and fast. With so many traders net-short volatility whilst S&P500 approaches new highs, it could serve well to trade long with caution.

WTI: Traders are their most bullish on WTI in 6-months, and this is the 6^th week in a row longs have increased exposure and shorts have reduced. Having suffered heavy losses between October and December (around 45%) it’s hard to label current positioning as a sentiment extreme. Whilst price action may appear a little stretched on a technical basis, the underlying flow appears supportive of the trend.

Copper: The net-long exposure, which confirmed the original breakout for copper in February has all but collapsed. An increase of gross-short positioning has dragged positioning back towards neutraland traders are close to switching to net-short. This now begs the question as to whether copper can remains within its elevated range, and brings potential for prices to move lower.

Author

Matt Simpson, CFTe, MSTA

CityIndex

Matt Simpson is a certified technical analyst who combines charts and fundamentals to generate trading themes.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.