Weekly Futures & FX Positioning Report - July 16, 2017

Dollar Sentiment Continues To Deteriorate As The British Pound Breaks Key 1.30 Resistance

●  Large speculators (non-commercials) in Japanese yen futures increase bearish bets for 4th straight week, reaching a new 2-year high.      
●  Euro specs reach all-time net long position vs the US dollar.                                         
●  Canadian dollar makes most significant (bullish) move in sentiment once again as net positioning eyes parity.                                          
●  Crude oil remains volatile, but stabilizes on back of continued gross short reduction.           
●  E-mini S&P 500 futures reaches all-time high as Nasdaq 100 futures nears record highs.                ●  US 10-year futures speculators hesitate ahead of Yellen, then slightly reverse bearish shift.

Yen bearishness (by large speculators) reached a new 2-year high according to the latest CFTC IMM report (as of July 11th).  Bearish bets by (non-commercial) speculators thrusted higher for the 4th straight week, bringing the net contracts total to -112K and the percentage of long positions down to the nearest  (a net)  21% . The number of gross short positions (vs the yen) nearly reached a record high.

This played out while the USD/JPY briefly breached key resistance on Tuesday before reversing lower and subsequently finishing the week down over 1 percent. According to the latest retail trader data (provided by Oanda Corp.), the retail population had been consistently increasing bullish bets (in favor of the Yen) as the Japanese currency declined over the last five weeks. That said, it has appeared that the latest reversal (in price-action) may have shifted retail traders, as (retail) positioning began to turn negative towards the Yen by the end of the week.

While last week's (USD/JPY) rejection at key resistance at 114.36 (May 10th high) highlights a potential (daily chart) ascending triangle pattern or worse a (lower) double top, it is more likely that large speculator's have temporarily exhausted their bearish stance and are merely taking a breather before resuming more downside pressure. If the USD/JPY continues south of 112.34 (38.2% retracement of previous up-trend), however, and the retail population continues to sell Yen, then it appears that large speculators may have substantially exhausted their Yen bearishness.

Speculative short reduction (gross & net) in the Euro remains an on-going theme as the net long tally (83K) broke the June high (79k). Bullish sentiment which had primarily been driven via short-covering now seems to be driven by outright buying. While this is typically a bullish development, the gross long position total has just surpassed mid-April's record high, which could possibly signal exhaustion for Euro bulls. That said, with the British pound breaking out vs the US dollar, and most sentiment metrics trending in favor of further for the EUR/USD, a weekly breakout above the mid-1.14 region would quickly expose the key 1.17 are then potentially 1.20 and above.

Speculative sentiment for the British pound was unchanged on a net percentage basis, but continued to make a push towards net (positions) parity. Gross long contracts gave back most of what had been gained the prior week, which may explain the Pound's 0.68% decline (in the 7/3 to 7/11 period). Subsequent price-action in Sterling, highlights a significant breach of resistance at 1.30 (GBP/USD) as retail traders (Oanda Corp) continue to remain rather skeptical. This continues to bode well for dollar bears while the retail population remains reluctant to follow recent strength in the Pound. Next stop for the GBP/USD could be the mid-1.32 region to the upper-1.34 area, which at that point would exhaust retail sentiment and temporarily stall price-action.

Aussie speculators continue to grow net longs, taking the net long percentage to 75%. This time, however, it was driven primarily in a large drop in gross shorts. It was the first week in a month that saw long positions decline, which may partly explain why the AUD/USD dropped by 0.30% (in the 7/3 to 7/11 period). Speculative bulls look to have continued their run, however, as the Aussie spiked 2.55% in subsequent trade for the week. That said, with large speculator's at already elevated bullish sentiment levels and retail trading potentially have capitulated (in regards to Aussie pessimism), the AUD/USD may encounter some struggle at key resistance at .7835 (April 2016 peak).

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 8th straight week. Speculative sentiment was nearly in parity (in terms of gross longs vs shorts) before the Loonie surged another 2%. 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, there are signs that retail traders are getting close in exhausting their pessimism. This suggest that the USD/CAD is expected to reach the 2016 low just below 1.25, some  consolidation in price-action is anticipated.

Gold bottomed in early part of last week, just before the completion of the latest CFTC IMM report. In spite of bullish sentiment among large speculators reaching fresh cycle lows, Gold futures managed to gain an additional 1% into the weekend. This suggest Gold's technicals and sentiment indicators were oversold and were due for a bounce. Although, Gold futures may have broken the initial downtrend (of the latest bout of weakness), the retail population (according to recent Oanda Corp data) is overly bullish (for gold) and is testing levels not seen since late last year. This suggests that Gold is most likely in the process of forming a base and will have to see speculative demand pick-up and retail traders to start selling for Gold to continue rise,  both of which have not been seen yet. Fortunately, for Gold bulls, US dollar deterioration (in both sentiment & price-action) should provide a tailwind of sorts.

Crude oil price-action was decisively volatile once again. Crude futures dipped over 4% in the 7/3 to 7/11 time frame (covered in the latest CFTC IMM report), then rallied over 3% thereafter. It seems that the continued reduction in gross shorts by speculators is partly to blame for Crude's stabilization. While  Crude oil speculators remain vulnerable to a further gross long reduction with the net percentage (of large speculators) at rather lofty levels (70%), if the US dollar continues to decline and speculative short-covering remains robust, Crude oil futures could recover back towards 50.

E-mini S&P 500 futures reached a fresh all-time high this week as large speculator's gross shorts continued to hover near the low-end of the year. While the short-covering theme stalled this week, it was the jump in gross longs that likely fueled the latest run-up into Friday. This is viewed as a healthy indication for equity bulls and should be reflected in the next CFTC IMM report and price-action going forward.

Nasdaq 100 futures walked back from last week's largest gross short position in over 7 years. Despite the dramatic drop in speculative gross longs, price-action in the Nasdaq has managed to recover back towards all-time highs. The nearly 2% move in the latter part of the week hint that gross longs have potentially bottomed and gross shorts have topped-out, both of which should fuel the Nasdaq to all-time highs. From there, however, the technical reaction will be critical in determining future direction for all stocks as the earnings season gets going.

Despite remaining (net) long, speculators in US 10-year futures have correctly played the latest bearish shift in price-action, by re-upping gross short positions and reducing gross longs over the past few weeks as well as the 7/3 to 7/11 (CFTC IMM report) time frame. That said, the positioning adjustments this week offset each other and the net long percentage remained the same at 59% (net long). This hesitation in sentiment ahead of last week's testimony to the government by Fed chair Janet Yellen was justified by her dovish remarks and highlights a potential base in the US 10-year in the 124.80 region. While, the technical and sentiment outlooks remain murky, if tens fail to recover any further than the 126 region,  then the aforementioned key 124.80 level could quickly be re-tested.

US 30-year futures speculators reduced their net long positions by 16K contracts, dropping the net (long) percentage to 58% from 61%. Gross longs continued to ascend to their highest level since the Financial Crisis in 2008, but were offset largely by a large increase in gross shorts. While speculators have largely been caught on the wrong side of the trade, the latest price-action in US 30-year futures have caused the technical outlook to be as murky as the outlook based on sentiment.

The complete 7.16.17 report with charts

Weekly Futures & FX Positioning Report - July 9, 2017

Crude Oil Vulnerable To Further Downside; Loonie & Pound Make Significant Moves In Sentiment

●  Large speculators (non-commercials) in Japanese yen futures increase bearish bets for 3rd straight week, according to the latest CFTC IMM report through last Monday (July 3rd).  
●  Euro short reduction remains the theme, while British pound specs grow less pessimistic.       
● Canadian dollar makes most significant (bullish) move in sentiment; Aussie (speculative) longs continue to ascend.
 ● Crude oil remains vulnerable to further downside; Gold pessimism grows as (non-commercial) net longs fall to lowest level since 2015.   
 ●  Nasdaq 100 futures (speculators) build largest (gross ) short position in over 7 years; E-mini S&P speculators cover gross shorts to lowest level since January. 
 ● US 30-year futures speculators caught covering shorts into weakness, while US 10-year futures speculators smartly re-up gross short positions.       

JY: Bearish bets by non-commercial speculators increased for the 3rd straight week, bringing the net (contracts) to -75K and the percentage of long positions to 27%. Retail traders, however, have continued to fight the latest bout of Yen weakness, taking the net percentage of longs to 49%. Meanwhile, the price of Yen futures fell 0.92% into July 3rd (holiday schedule) and fell an additional 0.46% into the weekend (July 7th). This suggests speculative bears remain in control and are expected to re-test (USD/JPY) key resistance at 104.36 (5/10/17 high).

EC/BP: Euro futures (speculative) short reduction (gross & net) remains the on-going theme as the net long tally headed further back towards the June high (79k). Interestingly, commercial traders participated in the EUR's recent rebound, raising gross short positions by 8K. British pound (speculative) sentiment made a  significant push towards net (positions) parity, as gross long contracts bumped up by roughly 9K.  Recent price-action in Sterling, highlights potential significant resistance at 1.30 (GBP/USD). Meanwhile, retail traders in both the euro and pound remain rather skeptical, merely consolidating recent skepticism. This bodes well for dollar bears as long as retail traders remain reluctant to follow recent strength in the euro and pound.

AD/CD: Canadian dollar futures have continued to make solid strides in both price and sentiment, with net (speculative) longs rising in both in net contracts and percentage for the 7th straight week. That said, the Loonie remains the most (net) short major currency besides the Japanese yen. Retail traders, however, continue to be extremely pessimistic, with only 27% of outstanding contracts long. Although, there is plenty of room to go for speculative bulls, there are minor signs that retail traders have potentially exhausted their pessimism, which could suggest some minor consolidation in price-action. Meanwhile, Aussie speculators continue to grow gross longs, taking the net long percentage to 70%. While, AUD speculative bulls look poised to continue their run, retail trading behavior looks to have bottomed (in terms of Aussie pessimism), which could suggest Australian dollar futures strength could be stalling.

GC/CL:Crude oil price-action was decisively volatile in both time frames, before and after quarter-end and the start to the 2nd half of 2017. After rallying into last Monday (July 3rd) 6.53%, bulls gave back roughly two-thirds of those gains rather quickly, to hint of at least a re-test of key support at 42 and perhaps lower. This leaves Crude oil speculators vulnerable to further gross long reduction with the net percentage (of large speculators) at rather lofty levels (68%). Gold futures, meanwhile, also seem poised for further deterioration in both price-action and sentiment, as both have broken key lows set in May. That said, retail sentiment is overly bullish for gold and is testing the May extreme peak, which could hint of temporary pause in the price in Gold before heading eventually lower. 

ES/NQ: Large speculator's gross shorts in E-mini S&P 500 futures continue to dwindle towards the low-end of the year, as the short-covering theme continues to buoy the bull run in price-action. Nasdaq 100 futures, on the other hand, have built the largest gross short position in over 7 years! The divergence in sentiment between ES & NQ futures sentiment has mimicked recent price-action and hints of a trading range for equity markets.

TY/US: US 30-year futures speculators have been caught fighting the latest (bearish) shift in treasury markets. While price-action has fallen 1.69% (in the period into 7/3),  gross short positions by non-commercial traders were reduced by 14K. Commercial traders, however, didn't offset the non-commercial reduction, but rather reduced their gross shorts by 8K. This explains that so-called "smart money" is on the short side and that next week's CFTC IMM report should show a sizeable reduction in in gross longs. Meanwhile, US 10-year futures speculators have correctly played the bearish shift in price-actions, by re-upping gross short positions as 10's sold-off by nearly 1% in the same period.

(Full report )7.9.17









      

Weekly Futures & FX Positioning Report - July 2, 2017

 Retail FX Fights Q2-End Reflationary Move; Nasdaq 100 Bulls Least Optimistic Since Trump Election

Large speculators (non-commercials) in Japanese yen futures and Canadian dollar futures made the most significant moves in the FX market, according to the latest CFTC IMM report through last Tuesday (June 27th).  Quarter-end squaring and comments by central bank's Draghi & Carney highlighted a reflationary trade that triggered a sell-off in global bond markets.  The Japanese yen had a huge jump in gross (speculative) shorts and euro bulls re-emerged to highlight last week's blip and continued ascendacy into (net) long territory. Retail FX traders, however, decisively fought strength versus the greenback and weakness in gold, attemping to pick bottoms in both going into the end of the 1st half and 2nd quarter of 2017. Meanwhile, both price-action and sentiment for Crude oil have seemingly bottomed-out, sparking the Loonie to continue its recent short-covering move. Both, the latest reversal n price-action and sentiment in the (US) 30-year futures suggests a potential shift, while speculators in Nasdaq 100 futures (NQ) continued to show less optimism, highlighting the lowest gross & net long position since the Trump election.

charts

Weekly Futures & FX Positioning Report - June 24, 2017

Euro Ends 2-month Short-covering Trend as Gross Shorts Increase By Nearly 50% ; Aussie Specs Add Very Bullish Position

●  Large speculators (non-commercials) in the Aussie (Australian dollar futures) and Euro futures made the most significant moves in the FX market, according to the latest CFTC IMM report through last Tuesday (June 20th).  Euro's 2-month short-covering trend (for large specs) came to an abrupt halt as gross shorts exploded by roughly 50%. The Euro's net long mark had reached levels not seen since October 2013 prior to last week's turnaround. Large speculators in Crude Oil futures continued to add short positions, to near the 300K contract mark once again.  While Oil prices have dipped to fresh 2017 lows, gross short positions and the overall net long position have not reached extremes yet. That said, both have inched closer to levels seen back in  May and previously in 2016, suggesting a temporary low could be near after perhaps the next thrust lower to 40. Both Nasdaq 100 & E-mini S&P futures saw large speculators reduce long exposure, highlighting a significant drop in open interest.

charts

Weekly Futures & FX Positioning Report - June 18, 2017

Euro Specs Largest Net Long Position Since 2013 Amidst Short-Covering Trend ; Treasury Specs Add Big Net Long Position


 Large speculators (non-commercials) in the Loonie (Canadian dollar futures) and Euro futures made the most significant moves in the FX market, according to the latest CFTC IMM report through last Tuesday (June 13th).  Euro gross short positions were trimmed vs the greenback once again, highlighting a 2-month short-covering trend for large specs. The Euro's net long mark reached levels not seen since October 2013. The Loonie, however, was the top performer among major currency pairs, rebounding for the 2nd straight week. Treasury speculators grew net long positions in a big way, adding roughly 60,000 (net) contracts for US 30-year & 10-year futures. Lastly, large speculators in Crude Oil futures grew gross short positions by over 15% ahead of another rough week for the energy complex that saw Oil prices dip over 3% once again. While energy prices are at new 2017 lows, gross short positions are still a distance from the May high and early 2016 levels.



charts

Two Trendlines To Pay Attention To This Week

The Japanese yen and Gold have gone hand-in-hand most of the year, in other words their moves have been highly correlated or directly inversely correlated, depending on how you look at it. More importantly, the two seem to be flirting with key trendlines, which if either are broken, could have huge ramifications for global markets.

Gold futures are testing a huge (down) trendline that goes back roughly 6 years ago during the end of the great bull run that the "yellow metal" enjoyed over several decades. The monthly chart shows several relevant touches, most recently last July when gold prices drove to 1375 (an exact Fibonacci retracement of the prior decline) and failed.

Since then, Gold has gyrated in a large range, but is testing the psychological 1300 region, which has capped now twice over the past few months. Depending on how you draw trendlines (I tend to intersect as many price points as possible), the trendline on a daily chart basis has been broken but failed to hold. The ensuing decline, however, paused exactly at a 38.2% fibonacci retracement level and the 20-day MA (which can be seen in the daily chart below).

On a monthly chart, bulls have only managed to probe the trendline, failing thus far on a monthly closis basis. If risk aversion increases as seen by various metrics on Friday, Gold could easily break and close above the monthly trendline. With political uncertainty and a lot of the month of June still to go, we'll have to monitor closely whether this calls for an upside breakout or whether this trendline stays in-tact.

The Japanese yen tested a key trendline last week too, but not nearly on the scale of gold's long-term down-wardly sloped trendline. On Friday, the USD/JPY touched this line for the third time, thereby validating a 1-month bear trendline.  This also occurred, co-incidently, while Gold was retracing its move off the recent cycle's high and bottomed (for the time being) at the 20-day MA and a key fib retracement.

Unfortunately, both these trendlines will not likely hold up due to the way the correlation between the two (Gold and yen) have held for some time. That said, a break in either of these trendline situations is likely to not only affect the other, but also have impact on all markets given the importance of both of these technical formations. PR

Weekly Futures & FX Positioning Report - June 10, 2017

Nasdaq shorts at highest level in a year while bets vs the USD pull-back prior to last week's reversals

●  Large speculators (non-commercials) in the Loonie and Pound made the most significant moves in the FX market, according to the latest CFTC IMM report through last Tuesday (June 6th).  Gross long positions were trimmed vs the greenback with exception to the Loonie, which may partly explain last week's (USD) minor recovery. Treasury speculators continued to grow gross shorts heading into last week and were finally rewarded as US treasury yields managed to bottom off the years' lows. Both ES (e-mini S&P 500 futs) and NQ (e-mini Nasdaq futs) were mostly unchanged on a net basis, as both gross long and shorts positions were added. Nasdaq gross shorts, however, grew to their highest level in nearly year, which may have contributed to Friday's strong pullback. Lastly, large speculators by both Gold and Crude Oil futures grew gross short positions more than gross longs, allowing relatively elevated net long positions (by percentage) to pull-back slightly. PR

Charts