COT Report 27.06.2014.
So, let’s see what the COT Report tells us this week. Very important that the percentile factors will always show the non-commercial speculators:
AUD: the currency showed a mixed picture against the majors and fundamentals were not so positive lately in my opinion. Both the economy is not doing great and Chinese slowing economy hurts the AUD. This week however some positive news came out and it is still the 2nd best currency with carry trade. Still 67.11% are long and I am more bearish than bullish on AUD.
CAD: there is a huge sentiment change in CAD! Last week only 38.12% of non-commercials were long, this week this proportion was changed to 46.92%! It shows the strength of the CAD and that means it might have quite a lot of pips to go.
CHF: if the COT Report gives a mixed and not so useful signal for a currency, then this award goes lately to the Swiss Franc. The percentile change between the different weeks is huge, showing that sentiment changes quite often. Two weeks ago long positions were 43.19%, last week 56.50% and this week only 38.57% long. The Franc is bullish on some pairs and bearish on others. The overall trends are mixed and you have to look absolutely unique on the CHF in the different pairs.
GBP: the British Pound just does not give it up! There are still 66.98% long, with very little difference to last week. On the chart at Cotbase.com we can see that small speculators are on COT extreme but large speculators are also very high. I just cannot change my bearish expectation on this currency.
NZD: although NZD is very strong, it is still not on an extreme COT level. Only 57.06% of non-commercials are long. A few weeks ago the currency was above 80%, now it is 57% and it did not lose much value. I will place pending orders against NZD but I think it will get some strength still so jumping in at market price is not what I do. The carry trade gives a huge advantage for NZD and helps to the currency to go even higher. This currency is tougher to turn around than the other currencies. I will stay away from this currency (only planning pending orders well above market price) and wait for bearish confirmation. Very long-term I am bearish but I change my medium turn bias to neutral.
EUR: the EUR is not so easy. Fundamentals are very bearish on the currency and it is continuously losing value. However on cotbase.com you can see that short positions are on COT extreme and only 32.84% of non-commercials are long. This shows me that more weakness is still in the cards but the huge short rallies on EUR might be over and we might handle the situation with more caution and have tighter stop losses.
JPY: I wrote yesterday in my weekly analysis that JPY showed a mixed picture. Well this is true, but which currency is on a COT extreme if not the JPY? Only 11.23% of non-commercials are long, which means there is not too many commercials are out there who can still go short! A turning point should come pretty soon!
USD: the USD is definitely a disappointment for me. In the last months I was waiting the whole time for better economic outlook but fundamentals and Fed are just not giving the signals. I change my neutral bias to bearish and look for short opportunities. I will stay flexible though and if major changes are coming then I will be ready to react with a plan.
BRL: Brazilian Real is definitely not one of the most traded currencies, but you might pay a little attention on it. Open interest increased about 30% since last week and long positions reached also 79.33%. I did never trade this currency, but if you have experience with it or want to try something new then go for it.
Open interest: a main change was seen by CAD where open interest decreased from 132 209 to 103 193. It shows that a large proportion of the people who wanted to enjoy the show already jumped in.
My current analysis shows the following results:
Bullish: CAD, JPY
Neutral: CHF, NZD
Bearish: GBP, EUR, AUD, USD
Let’s see what the next week brings to us!