Weekly COT Report: USD Bulls Shed $10 Billion Of Exposure

As of Tuesday 7th January:

  • Net-long exposure to USD fell to $4.3 billion. At -$10.2 billion from the prior week, it’s the least bullish investors have been to the dollar since June 2018.
  • Traders were the most bullish on GBP since May 2018.
  • Large speculators were on the cusp of flipping net-long on NZD.
  • Traders were their least bearish on JPY in nearly 3-months. Read More

USD/CHF Is On Track For A Bearish Engulfing Month (Which Forecasts April Showers)

With USD/CHF on the cusp of a bearish engulfing month, we take a look at the pattern’s forward returns alongside the Swiss franc’s seasonality.

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Conservatives Crush Labour In A Landslide Victory

 

Like him or loathe him, Boris Johnson is on track for the biggest election win since Margaret Thatcher, which is some feat given how polarised the Brexit debate has always been.

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BOC Optimism and Firmer WTI Boosts CAD

BOC held rates as expected, although their statement was optimistic enough to send the Canadian dollar sharply higher.

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RBA Hold Rates, Yet Could ‘Ease’ Their Way Into 2020

In the final meeting of the year, RBA decided to keep rates on hold 0.75%, whilst keeping the door open for further cuts. Read More

USD/CHF Hesitates Below Parity (A Level Undefeated Since May)

USD/CHF is approaching parity, a level which is clearly on the radar for market participants. Despite several failed attempts, USD/CHF has not closed above parity since May 2019. We could quibble over the fact that it opened above 1.0000 by a whisker on the 19th of June, yet the fact it marked the beginning of 3.2% slide should also be factored in. Early October saw four volatile candles produce upper wicks which failed to conquer the key level and it has gone untouched since, although prices are now approaching it once more. Read More

Historically, How Bearish Has A ‘Bearish Outside Week’ Been On The ASX200?

By Friday’s close, the ASX200 had produced a bearish outside week after failing to hold above 6,800 which raises the potential for some mean reversion. Given the slight bearish divergence forming with RSI and the clear loss of momentum leading it back towards its all-time high, we explore the bearish potential of this classic candlestick pattern to see if it can pull the rug from under Santa’s rally in December. Read More

Wilkins Lays The Groundwork For BOC To Ease

BOC’s Senior Deputy Governor Carolyn Wilkins delivered which appears to be laying the groundwork for a potential cut. Whilst she tips her hat to an economy which is “relatively well overall”, she pointed to regional differences and reiterated concerns over the “immense challenges” faced by the global economy.

On rates, whilst they “may be relatively low now” she added the bank “still has room to manoeuvre” and that “lowering rates could provide some insurance against downside to inflation”. Moreover, she added that the central bank has additional options in their tool kit such as “extraordinary forward guidance and large-scale asset purchases”.

With CPI data later today and Poloz due to speak tomorrow, we could see a further follow-through with CAD weakness should inflation disappoint and Poloz add his own dovish remarks. There’s also retail sales, GDP and PPI data ahead of their next meeting on the 4th of December.

CPI: BOC year over year inflation data sits around the centre band of their 1-3% target, with standard CPI YoY at 1.9%, trimmed mean at 2.1% and weighted median at 2.2%. On a monthly basis however, CPI has contracted three times over the last four prints, with September’s read at -0.15% below a -1 standard deviations. Eventually these monthly figures will weigh on the slowly moving yearly reads, so another negative print would see a rise in expectations for BOC to cut in December or February. Furthermore, if oil prices are to weaken it could further weigh on the Canadian dollar and eventually inflation.

NZD/CAD was the biggest gainer of the US session, breaking key resistance at 0.8500 and closing above the March trendline to a 12-week high. Given that NZD traders remain heavily short, data is improving and TWI remains well below RBNZ’s own forecast, we continue to see upside potential for NZD crosses and CAD could be the ideal currency to pair it with, if BOC extend their dovish rhetoric and data weakens.

  • A bullish engulfing candle closed firmly above key resistance and the bearish channel.
  • The 50 and 100-day eMA’s could provide support around the low of the engulfing candle or 0.8500 support.
  • Whilst 0.8500 may hold as support for near-term bullish opportunities, bulls could consider seeking dips above the 0.8430 low.
  • Near-term target is around 0.8600, near swing high/low and the 200-day eMA.

AUD/CAD also shows potential for a deeper correction, if not a reversal against its bearish trend. Declines slatted around the July 2010 low and a bullish piercing pattern confirmed a bear-trap with a false break of support. Having rebound to 0.9100, prices have pulled back and yesterday’s bullish engulfing candle raises the potential for a higher low to form. Moreover, it could be part of an inverted head and shoulders pattern.

  • Near-term bias remains bullish above yesterday’s low (0.8967) and for a re-test of the 0.9144 high.
  • A break above 0.9144 confirms an inverted head and shoulders pattern which, if successful, projects a target around the 0.9456
  • Failure of 0.9144 to break suggests the cross is to remain in a choppy sideways range, where bears could seek shorts at the highs and bulls seek dips lower down I the rage.

Related Analysis:
USD/CAD Still in Apex
Whether It Breaks Or Reverts To This Year’s Trend, 0.8500 Is Key For NZD/CAD
GBP/CAD breaks out ahead of busy week for Loonie

RBNZ Hold Rate And Refrain From A Dovish Meeting – Is the Low in?

RBNZ held and refrained talking their currency down, seeing the Kiwi dollar spike higher across the board.

RBNZ Expected To Cut Rates, Yet Their Degree Of Dovishness Is Key | NZD/USD, NZD/CAD