US Dollar, GBP/USD, USD/CAD, COT Report –Analysis
US Dollar Flips Net Long, CAD, AUD & GBP See Large Sellers
In the most recent CFTC report, sentiment in the USD has flipped net long for the first time since March 2020. The shift had arguably been a long time coming, given various reflation trades had peaked in the months prior while a hawkish Federal Reserve had also aided the upside in the greenback. The past week saw a wave of USD buying ($4.4bln) in response to the deterioration in risk sentiment with the bulk of the move against the Euro.
Across the commodity currencies, the Canadian Dollar had been hardest hit with net long positioning halved, prompting USD/CAD to tag the 1.2800 handle. That being said, with positioning no longer stretched, the CAD is beginning to look more attractive from a value standpoint. Elsewhere, the Aussie had also come under pressure with another $500mln added to net shorts. Although, with lockdown and Delta virus concerns well priced into the currency, prospects for the Aussie may start to improve with the upcoming CPI data perhaps the catalyst to spark some life into the currency. However, I am cognisant of the recent turbulence across Chinese markets that have capped upside in the Aussie.
Elsewhere, the Pound had been another currency to feel the brunt of a reduction in risk markets, piercing its 200DMA having flipped net short. Although, with positioning now not an issue and with the spread of the Delta variant starting to make a turn for the better, my view on the currency is on the positive side as we head into the BoE meeting.
Weekly FX Positioning
Source: CFTC, DailyFX (Covers up to July 20th, released July 23rd)
The Analytical Abilities of the COT Report
US Dollar Positioning
Source: Refinitiv, DailyFX
GBP/USD Positioning
Source: Refinitiv, DailyFX
USD/CAD Positioning
Source: Refinitiv, DailyFX
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