CFTC COT DATA:
- USD aggregated net long positions decreased a further 8.2% to $29 bln
- EUR net spec shorts decreased from 190,127 to 178,876 contracts this week, a reduction of 5.6%.
- JPY short positioning decreased 24% from 31,183 to 23,593 contracts this week
- AUD net long positioning soars from 626 to 4,487 contracts this week
EUR/USD – Outlook Bearish
Another solid week for the single currency. We saw price punch through last week’s highs to challenge the 1.14 handle as US retail sales failed to reignite the USD bulls, with the continued rise in European yields adding support also. German GDP came in slightly below forecast whilst CPI came in slightly above and Eurozone GDP came in in-line. Again, last week we saw EUR/USD’s rise, a case of benefiting from USD weakness rather than fresh EUR strength
- Strength active sell signal, ticking up from April lows
- Index active buy signal, bullish cross, enter long positions
- Momentum active buy signal, ticking higher
- Order Flow Trader Bullish
GBP/USD – Outlook Bearish
Continued to strengthen last week as the UK benefits from investor flow on the back of the (business friendly) Conservative party’s majority return to government. We saw some GBP selling as the BoE cut its 2015 growth forecast from 2.9%-2.5%, but a surprise increase in service sector wages helped support the UK currency with the first rate increases set to take place in Q2 2016. This week, CPI data is the headline event, bringing the risk that we dip into deflation for the first time since 1989, which would considerably undermine GBP’s recent strength.
- Strength active sell signal, ticks down
- Index active buy signal, bearish cross sell signal
- Momentum active buy signal, ticks down from last weeks high
- Order Flow Trader Bullish
USD/JPY – Outlook Bullish
Weakened against the majors but still remaining firmly range-bound against the USD, with some initial strength as improvements in Japan’s external account surplus prompted USD/JPY selling. This range is likely to remain so long as we don’t see any more easing from the BoJ or any data surprises out of the US.
- Strength active buy signal, ticking down
- Index active sell signal, ticks lower
- Momentum active sell signal, tick down
- Order Flow Trader Bearish
USD/CHF – Outlook Bearish
Weekly sight deposits up by another CHF2bn to now CHF452.5b. This suggests that the SNB has bought another CHF2bn worth of foreign currency, putting the total in recent weeks to about CHF9bn. So far, the market has taken evidence of intervention as a EUR/CHF positive. However, the apparent ‘leaning against the wind’ could ultimately risk speculative money betting the other way if the central bank approach is seen as weak.
- Strength active sell signal, ticking down
- Index sell signal active, ticks down at lows
- Momentum sell signal active, ticks down at lows
- Order Flow Trader Bearish
AUD/USD – Outlook Bearish
A whipsaw week for the Australian currency, as we saw price rise through highs only to be met by strong macro fund supply, sending price right back down. It’s high beta status makes it a favourite for short USD plays, and markets are pricing out expectations of a further RBA rate cut this year. As with EUR, upside room appears limited to tactical advancement only, in lieu of resumed USD strength. A slowdown in Chinese growth also hampers the Aussie’s trading outlook.
- Strength active sell signal, ticking up to test convergence levels
- Index active buy signal, at highs
- Momentum active buy signal, ticking down from last weeks highs
- Order Flow Trader Bullish
USD/CAD Outlook – Bullish
Canadian data has continued to upstage that of its famous neighbour and with the BoC on hold, flows have been supportive again this week. The distressed oil sector in the country remains an issue. Canadian CPI is next on watch, and it will be interesting to see if again we see Canada come in above the US, which would push price through the recent 1.1918 low
- Strength active buy signal, ticks down closer to convergence levels
- Index active sell signal, ticks down confirming sell signal
- Momentum sell signal, continues to tick down
