Sunday, August 20, 2017

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 was once again with the Japanese yen, as the percentage of long (futures) positions of speculators improved for the 3rd straight week. This enabled the net percentage (of long positions) to edge higher to 26%, highlighting an improvement off the recent 2-year low.  The number of gross short positions (vs the yen), fell for the 4th straight week, allowing for the net (position total) to increase by another 18K.  According to retail trader data provided by Oanda Corporation, the retail population continues to fade yen strength, pushing the overall percentage of bulls down to 31%. While this is still near the year's low (in terms of retail optimism for the yen), in both previous occasions that the percentage reached these (low) levels, the yen grinded higher the subsequent few weeks. A solid break below 108.67 would confirm a bearish and would expose the 107.85 (key Fibonacci retracement) to mid-105 region next. That said, if the broad dollar correction were to continue, a substantial base at 108.67 could be highlighted on price-action moving beyond the 111.00 handle (USD/JPY).

The net long tally for euro (futures) speculators inched lower once again after having ticked-up the previous week. Price-action for EUR/USD edged down accordingly during that period (8/8 to 8/15) as euro bulls continue to consolidate recent 18-month highs. The gross long position dropped by over 10k and gross shorts edged up slightly, allowing for the net percentage (63% long) to dip. This potentially highlights a top or ceiling in terms of sentiment for large speculators. According to the latest data from Oanda Corporation, retail traders seem to be undecided with regards to the euro. That said, retail optimism has seemingly bottomed, suggesting that euro could endure a broader correction vs the USD, especially if support at the key 1.17 handle for the EUR/USD is compromised.

British pound sentiment by large speculators dipped slightly, according the latest COT report. Price-action of the GBP/USD suffered a 1% loss in that period, testing 100-day moving average support once again.  The bump up in gross long positions were outpaced by the increase in gross shorts, allowing for the net long percentage to move down to 40% from 41%. According to recent data provided by Oanda Corporation, retail traders optimism towards Sterling has moved higher, as the percentage of longs bumped up to 47% by Friday (8/18). Momentum for both sentiment and the short-term technical outlook hint of additional downside for the British pound. A clean break of the 100-day would expose the key 1.26 region for the GBP/USD.

Australian dollar sentiment by large speculators vs the greenback has stalled out at 73% after plateauing at 78% two weeks ago. According to the latest CFTC data, speculators continue to grow net longs, however, but because both moves in gross long & shorts were miniscule, it was not enough to move the needle. Retail traders (according to recent Oanda data) increased their optimism towards the aussie, as the net long percentage moved up to 46%, putting distance to the (31%) low seen back in July. If, however, last week's 1.39% recovery by the AUD/USD was fueled solely by retail traders, then its likely that the Australian dollar is merely consolidating a larger downward correction. That said, if the 78 cent handle (AUD/USD) were to continue to support, a drive back towards the 81 cent threshold cannot be ruled out.

Canadian dollar (futures) sentiment by large speculators finally reversed a 12-week consecutive streak of increases on both the net long tally and net long percentage. Profit-taking finally ensued according to the CFTC, as gross long positions were trimmed quite substantially (by 12K), while gross shorts held steady at around 35K. The USD/CAD also had continued to enjoy its rebound off the July low, edging up nearly two-thirds a percent during the same period (8/8 to 8/15) of the latest COT report. Unfortunately, that recovery was seemingly short-lived as the Loonie ended up rallying 1.36% subsequently. Retail traders (according to recent data provided by Oanda Corporation), however, have continued to buy the Loonie after having sold it over the past few months. This suggests the Loonie could correct some more while overstretched large speculators continue to take profits on their long positions. 

Gold futures sentiment continues to show improvement, as both net positions by total and by percentage ticked up for the 5th straight week. Gold's price-action hints of a potential monthly chart breakout of a 6-year bear trendline amid heightened overall market volatility. According to recent Oanda Corporation data, retail traders continued to sell, allowing for the persistent move down in optimism to reach the lowest levels in over a year (at 46% net long). Although, key resistance in the 1300 region was breached only briefly on Friday, the move likely softened-up the path towards the 2016 peak at 1375.

While Crude oil futures suffered a 3% drop after struggling to clear the 50 handle, positioning by large speculators only fell marginally in the same period as the latest CFTC's COT report (8/8 to 8/15). This may partly explain Crude oil's 2% recovery seen in the back half of last week. Meanwhile, gross long positions by large speculators dipped along with a modest tick up in gross shorts, allowing for the net percentage of longs to dip to 75%. Crude oil's price-action continues to reject at key weekly trendline resistance that has capped since February. If, bulls can finally clear it (now just under 50), Crude futures should extend the recent recovery towards the 52 region first, then potentially 55 further out. That said, if gross longs have indeed topped-out and the 46 threshold is decisively taken-out to the downside, then price-action could soon be headed towards the 42-44 zone.

E-mini S&P 500 futures sentiment and price action have begun to diverge. E-mini S&P 500 speculators literally doubled their net long tally as stocks technically continued to consolidate the recent run-up to all-time high. According to the latest COT data as of 8/15, large speculator's increased gross longs by 34K and covered gross shorts by nearly 40K. This suggests that large speculators are largely playing into further strength on dips for the S&P 500. That said, the data did not cover the subsequent decline seen in the tail-end of last week. Moreover,last week's data from the CFTC also contradicts with recent movement by speculators which pointed to increased pessimism. The volatile swings of optimism and pessimism, coupled with the increase in equity market volatility, suggests that overall market is gearing towards a directional breakout. Technical momentum has seemingly reversed, however, as stock indices now are technically starting to produce lower tops. Thus, a choppy decline is expected for E-mini S&P futures towards the 2400 region.

Nasdaq 100 futures speculators mildly covered (gross) short positions and mildly added gross longs, according to the latest COT report. This allowed the net long percentage to inch up to 64% and net long tally to increase by 5K.  Meanwhile, the technical picture looks a bit susceptible at the moment, as technical momentum has shifted lower. The reaction seen next week as a result of the Nasdaq 100's newly formed lower top will quickly foretell whether near-term price-action will re-test the lows seen back in May & July or not. A bearish start to next week could trigger a quick 2-3% decline (from current levels), given how long it has been since the last 5% correction occurred.

US 10-Year futures continue to grind higher on the back heightened overall market volatility, while speculators continue to slowly decrease their net long position. According to the most recent CFTC data, speculators covered some (gross) short positions and added some (gross) short positions, allowing for the net long percentage to decrease to 56%. This highlights a divergence of some sorts, as the technical base that formed in US 10-year futures at 124.80 has continued to buoy price-action towards the June peak in the mid-127 region. More importantly, however, is what occurs once price-action gets there, as it determines whether the latest 8-month recovery off the key 123 handle is merely a corrective bounce or not. 

US 30-year futures speculators optimism stalled, according to the latest COT report, as bullish sentiment halted at its 2017 high at 61%. Gross longs continued to hover near their highest level since the Financial Crisis in 2008, while gross shorts decreased by roughly 10K. Meanwhile, the recent advance in price-action has been choppy on its quest to re-test the June peak at 157.80, but is likely to do so given the upward trend that is in place technically and in sentiment.

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...