The following are the key takeaways from this week's COT report as provided by Scotiabank. (Data in this report cover up to Tuesday Oct 27 and were released Friday Oct 30).
This week’s changes in sentiment reinforce our expectations of a turn in the broader USD, with the aggregate USD long rising a remarkable $8.1bn w/w at the fastest pace since August 2014. The deterioration in sentiment toward EUR and JPY was responsible for much of the change. EUR, JPY, AUD and CAD are the largest held net shorts with sentiment toward USD/MXN, CHF, NZD and GBP relatively neutral.
EUR sentiment has deteriorated considerably, the net short widening $5.8bn to $14.6bn at its fastest pace since May 2014. This week’s deterioration has pushed sentiment to its most bearish in two months, with the violence of the shift hinting to the risk of a broader turn and the potential for further deterioration.
Sentiment toward JPY appears to be showing signs of renewed deterioration following last week’s moderation to its narrowest net short in over three years. As with EUR, this week’s $3.1bn swing to a net short $3.5bn position hints to the risk of a broader, medium-term turn in sentiment.
CAD sentiment has improved considerably, with four consecutive weeks of narrowing in the net short providing for a cumulative $1.7bn swing to $1.4bn. The lack of corresponding movement in spot hints to the risk for CAD as sentiment returns to balance.
