FE, it’s a little different for the commercials pre Brexit.
Many guys suggest that Brexit is just a UK, therefore GBP, scenario, but from a commercial viewpoint it is much more.
The referendum represents the one thing that business hates most - uncertainty, to legislate for the outcome is difficult and involves taking action on Eur, Usd and Gbp.
Good chance that COT will reflect this positioning.
I saw somewhere on BP a poster reflecting on Gbp Cot positioning, truth is that many commercials are buying Gbp because it’s cheap.
Isn’t the time frame you used too short? Looks like you used a 26 week period for the CoT Index. Using a 3 year period the swing you saw is flattened to 66 to 43 to 85 which are all within the extremes. You wouldn’t have traded in that case, correct?
completely correct. The reason for the 26 weeks was only because Wiliams used that one, but he also said it doesnt mean that it is the most optimal value. However the COT index is actually there to catch some swings and with the value of 3 years you might be missing out all the moves from a trend.
We’re on the same path yet again. I had always been looking at the shorter time frames but changed to the 3 year to give you the spreadsheet I sent along. I now have another spreadsheet and playing with the idea of a 3 year and 26 week index analogous to 50 and 200 SMA’s. That’s why you haven’t heard from me lately.
after the crazy Brexit outcome, I will interested the next Friday to see insitutional positioning. This is a littlebit similar situation to the SNB event. I expect today to see a little more bullish report from insitutionals on the GBP compared to last week, and next week there might be a huge change. We will see.
As I mentioned earlier, commercials are buying GBP, and I’d expect quite a few more did so yesterday.
Doesn’t mean that they expect the fall to stop, they have no specific opinion on that.
Analysts’ opinions are divided, the Boe will act if a fall against Usd continues (likely a statement on int rates), if a new base forms at current levels then no immediate Boe statement needed.
I mentioned back awhile that Eur/Gbp levels around 80.00 are very acceptable to many businesses, so there is no immediate need for action on that front.
The largest problem, right now, is cable - a comparison of the monthly chart on Gbp/Usd and Eur/Gbp gives a sense on the likely direction of consumer prices for the UK.
Hey people, long time!
Sorry I haven’t been in a while, life has been good.
I still follow the traditional COT index, although I see FE is trying some new things. Keep me posted buddy
As for me, I agree with Peterma’s position on GBP. I’m looking for the right opportunity to buy but that hasn’t come yet.
Based on the COT I am:
Bullish on GBP and Oil
Bearish on CAD, Gold, AUD and Yen.
I saw a very brief interview with Larry Williams on Bloomberg recently. He said he was bullish on Oil (expected a pull back however), and bearish on gold (expected another leg up.) If I remember correctly he thought these moves would start happening in October.
I am not in any trade so far, but I am very close to buying USDCAD.
can you share your view on commodities? I know you use copper as a measurement of the economy. Recently it has shown some strong signals. That for me is not enough to make long term conclusions, however gold and silver both exploded to the upside too. From gold we know how it “works” in uncerntainty, but silver is only an industrial metal so the 10%+ value increase in 1 week is definitely something to discuss and think about.
I have not much of an opinion on oil, I find it currently in a ranging market.
some fundamental write up combined with COT findings.
GBP is the currency to watch out. Interestingly, it is neither on an extreme net position nor on an extreme COT index positions. I pretty much agree with Peter that for investors it is a great opportunity to buy at the lows, basically vs. any other currency. At the same time I do not trade it now as there is just too much uncerntainty, we do not know until when the currency falls after the vote. I believe nobody exactly knows the conclusions and the future of the UK based on that vote so it is not clear yet how to trade GBP. I leave it.
On the ther side, Pip Diddy had a great article yesterday about the commodities where I agree with his view on the comdolls, especially the NZD strength. I try to combine that strength with a weakness of another currency from a fundamental perspective and my idea to trade is NZD/CHF long, which I observed from a technical point of view and looks also logical to trade on the long side.
I have no opinion on commodities other than that on the signs remain positive, the double bottom on the CRB index that formed early this year seems to have signalled a change.
Not surprised at silver jump, remember that Murphy mentioned that it is viewed both as industrial and also as precious, so the precious aspect helped by Gold.
On Gbp, the commercials are buying because it’s cheap, Eur/Gbp providers now offering a rate of 82.00, haven’t seen that number in a long time. The expectation is that we will see them offer 85.00 in the not too distant future (inter bank around 86.50)
The conservative party election will have an immediate Gbp reaction, if Mrs May wins then good chance that Gbp would react positively.
we should always have a week behind us, just like the last one. You made I guess some great trades on EUR/GBP long based on your analysis, I did the same with my NZD/CHF long trades. I was though surprise on the huge GBP losses, as you have stated once, we might be looking for a new, long-term base for GBP pairs. I am still not trading it. If commercials bought GBP earlier, because it was cheap, well, now they can even buy more from it!
I also checked, EUR/GBP is at an important resistance zone, GBP/CHF is at an important support zone (the correlation makes complete sense of course). It will be interesting to observe how it all plays out.
Checked the COT Index for the British Pound to see how my earlier idea of the extreme readings played out. Although there have been some pretty large movements on the scale, but not as radical as I thought and at this time it moves more sideways.
I am checking the readings on a weekly basis for good re-entry opportunities on gold or silver, but we are nowhere near to get a good signal for entering.
Yeah, I anticipate a levelling off now on Eur/Gbp, for a while at least, probably will get to 85.00 during the week - then all the stuff with polls / negotiations to play out.
Where Gbp will ultimately go is anyone’s guess, maybe some more commercial buying in the week ahead, some of them may have held back with the anticipation of the 85.00 price tag.
Btw, one side effect of the falling pound is being felt, although not much reported on.
Wholesale prices will likely see a rise, most news stories refer to the likely rise in fuel costs for the UK, but there are many letters being received giving prior notice of price increases in other spheres of business, from industrials to even mobile phone providers.
Longer term the Boe could see it’s target inflation of 2% arrive earlier than anticipated
No, this is where fundamentals as we understand them do not apply.
In a situation of unknown as is the current post Brexit, economics are more governed by fear than by reason, the one country springs to mind is Zimbabwe and it’s inflation, not suggesting that the UK will emulate, just thinking how inflation does not mean buying when fear is introduced.
There is a raised level of fear by investors with regard to the UK at present, I cannot see how politicians can alleviate that fear in the immediate future, therefore the outlook for Gbp is negative.
I suspect that the Boe will find themselves between a rock and a hard place, also suspect that they have figured this themselves.
