Sunday, July 23, 2017

Weekly Futures & FX Positioning Report - July 23, 2017

US dollar sentiment declined vs all the major currencies except for the Japanese Yen, according to the latest CFTC IMM report (as of July 18th) . Once again, bearish bets by (non-commercial) Yen speculators thrusted higher for the 5th straight week, bringing the net contracts total to -126K and the percentage of long positions (19%) down to the lowest level in 2 years.  This was spurred mostly by the number of gross short positions (vs the yen), which too reached a record high.

The Yen, however, has begun to rally (or the USD/JPY has begun to decline), as broad dollar weakness has finally materialized for the Yen and even gold. According to the latest retail trader data (provided by Oanda Corporation), the retail population has begun to show signs of fading Yen strength once again.

This is a promising sign for dollar bears because it suggests that large (non-commercial) traders have likely started reducing their record breaking short positions, due to the highly inverse correlation with the retail population. Moreover, while key resistance at 114.36 (USD/JPY) continues to highlight an ascending triangle pattern or potentially, worse a (lower) double top, the USD/JPY should continue heading towards 110.00 then possibly 108.00.

It was a good week for euro bulls, as the net long tally continued higher to 91K, mirroring the EUR/USD's rise to fresh 2-year highs. While the gross long position total stands at a record high, the net percentage (65% long) is still below the June high of 66%, but the trend that speculators have set clearly has momentum on its side. Broad dollar weakness could induce a breakout of the 1.17 region (EUR/USD) that would expose 1.20 and beyond once overbought technical readings have been alleviated.

Speculative sentiment for the British pound continued to make a push towards net (positions) parity. Gross long contracts gained 4K to up the net long percentage to 43%. The Pound, however, struggled to make headway last week on the recent breach of resistance at 1.30 (GBP/USD). This may have to do with retail traders (Oanda Corporation), which have seemingly bought-in to the Sterling's recent rise. That said, if the 20-day moving average continues to support and broad dollar weakness persist, the GBP/USD should test the key 1.32 region.

The Aussie has been the darling of the major currencies for 2017, rising nearly 10% on a trade-weighted basis. Speculators continue to grow net longs, taking the net long percentage to a red-hot 80%. That said, with large speculator's at already elevated (bullish sentiment) levels and the retail trading population have seemingly capitulated (in regards to Aussie pessimism), the AUD/USD may encounter some struggle at current levels or potentially at the psychological 80 cent threshold.

 Canadian dollar futures have continued to trend higher in both price and sentiment, with net (speculative) longs surging in both in net contracts and percentage for the 9th straight week. Speculative sentiment has finally broke parity (in terms of gross longs vs shorts) before the Loonie inched further towards key 1.25 region (USD/CAD). Retail traders, however, continue to be extremely pessimistic, with only 29% of outstanding contracts long.

Although, there is plenty of room to go for speculative bulls, the recent trend has been one-sided and notably, retail traders are close to exhausting their pessimism towards the Canadian dollar. This suggest that the USD/CAD could encounter some consolidation either here or once it reaches the 2016 low until overstretched technicals work themselves out.  The good news is that the speculative trend remains intact and the Loonie stands to gain while broad dollar weakness persists.

Gold's price-action and (negative) sentiment has seemingly bottomed-out. With speculative positioning essentially unchanged (in the latest CFTC IMM report), both gross long & short positions have stalled negative trends against Gold futures. According to recent Oanda Corporation data, retail traders have curbed their overly bullish positions (for gold) and have started to sell into the recent rally. This suggests that Gold has most likely formed a base ahead of 1200 and will likely re-test the 1270 region before encountering overbought resistance. Fortunately, for Gold bulls, US dollar deterioration (in both sentiment & price-action) should provide a tailwind back towards the key 1300 area.

Crude oil's continued reduction in gross shorts by speculators has managed to stabilize price-action. This week, however, saw a huge jump by gross long positions, which lifted the net percentage of longs to 72%. That was early in the week, however, as price-action fell over 1% into the weekend. More importantly, this occurred while the US dollar simultaneously fell, an ominous sign for crude bulls.

The in-ability of Crude oil to clear the early July peak (just above 47) last week could signal a key one-month double top, if bulls do not cease immediate control early  this week.  If Friday's decline turns out to be a one-off or a short-term selling exhaustion ahead of a weekend type set-up, then Crude oil futures could easily recover back towards 50 in the near-term.

E-mini S&P 500 futures reached another fresh all-time high this week as large speculator's gross longs surged once again. Gross shorts, however, inched up, but continue to hover near the low-end of the year. While the short-covering theme has seemingly stalled as of late, the pace of the pick-up in gross long positions is a healthy indication and should continue to buoy price-action towards 2500.

Nasdaq 100 futures welcomed back the speculative bulls by reaching a fresh all-time high. Despite this gross short positions recouped most of last week's reduction to hover near the largest gross short position in over 7 years. That said, gross longs have seemingly bottomed-out, which has allowed the net long percentage to bottom-out as well. As the earnings season moves into high gear this week, the reaction of the Nasdaq 100 at current (price) levels is critical in determining whether this recent move to fresh highs is sustainable or not.

Speculators returned to buying US 10-year futures last week, as gross long positions increased by 30K. This lifted the net long percentage to 60%, which highlights a steady range in bullish sentiment. More importantly, however, it highlights a technical base in the US 10-year at 124.80, which could merit a move back towards the mid-June peak in the mid-127 region.

US 30-year futures speculators did not make signicant moves in sentiment as the net (long) percentage held steady at 58%. Gross longs continued to hover near their highest level since the Financial Crisis in 2008, but have offset largely by the steady increase in gross shorts. The indecisive moves by speculators coupled with range-bound price-action continue to contribute to an unclear outlook which could see more range-bound trade for the rest of the summer.

Weekly Futures & FX Positioning Report - August 20, 2017

According to the latest COT (Commitment of Traders) report (as of August 15th), the most significant move in the FX futures positioning w...