Weekly COT Report: Sterling Traders The Least Bearish In 3-Months
Matt Simpson October 14, 2019 2:43 AM
A summary of the weekly Commitment of Traders Report (COT) from CFTC to show market positioning among large speculators.
As of Tuesday 8th October:
- Traders increased net-long exposure for a 4th consecutive week by $0.8 billion.
- The Euro saw the largest weekly change among FX majors, seeing net-short exposure increase by 9.4k contracts.
- Large speculators were their least bearish on the British pound in 3 months.
- Large speculators were their least bullish on the Japanese yen in 2 months.
EUR: Net-short exposure dropped to its most bearish level in 4-months. Gross short exposure remains near a 4-month high, although last week’s increase of bearishness was a function of both longs and shorts closing out. Yet, whilst positioning doesn’t scream a sentiment extreme, EUR/USD rallied nearly 1% between Tuesday’s close (when the report was compiled) and Friday’s high on progress with US-China trade talks. So, is the low in? Perhaps, but I’m not currently convinced from this alone. There’s still a long way to go on trade talks and traders remains net-short on the Euro. So until we see a material pick-up with gross longs and closure of shorts, it’s probably better to assume the trend remains bearish.
GBP: Over the past three weeks we’ve seen gross longs increase and gross shorts decreased; albeit by a small amount but it has allowed net-short exposure to fall to a 3-month low. Given the 4% rally on cable over Thursday and Friday on Brexit developments, we’d expect net-short exposure to fall notably, assuming traders still think there’s chance of a deal before 31st of October. And looking at the cycles of net-short exposure, it’s plausible that the low was in around mid-August.
As of Tuesday 8th October:
- WTI Traders reduced net-long exposure to a 4-month low.
- Bullish positioning on Palladium was at its highest level in 8-months.
- Net-short exposure to copper was at its most bearish level in 8-weeks.
- Only minor adjustments to gold positioning sees net-long exposure remain stubbornly high.
WTI: Net-long exposure declined for a fourth consecutive week, taking bullish exposure for large speculators to their least bullish in 4-months. However, managed funds (pictured above) saw bullish net-long exposure fall to a 9-month low. Gross shorts are at their most bearish level since January, adding +36.9k contracts last week alone (or over +75k over the past three weeks) so some funds may have been squeezed following the missile attack on an Iranian oil tanker on Friday. Yet with volatility remaining relatively low following the attack, some funds may see the bounce as a reason to add to shorts unless geopolitical tensions rise, or we see another supply shock to make prices truly rally.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.