Latest CoT bias remains extreme long dollar index, long yen
Canadian dollar underperforms as energy underlying finishes the week in the red, while safe haven yen outperforms.
EUR/USD: Finishing higher for the week but with its bear trend channel still intact
From a weekly standpoint, it’s bear trend channel continues to hold whereby its price is below all its main weekly moving averages and with its Relative Strength Index (RSI) now in oversold territory. Overall, with its remaining main technical indicators neutral and significant oscillatory movement and breakout strategies have been a tougher sell in the absence of fundamental shifts. Retail bias is still heavy long but down by 8% since the start of last week due to profit-taking on fresh longs who would have been in for a significant squeeze had the pair’s price trended lower. The latest Commitment of Traders (CoT) report shows majority short bias unchanged at 58%, with an increase in euro longs by 11,598 lots and in euro shorts by 16,827 lots. Be on the look out for any retaliatory tariffs out of the EU that could cause the US-EU trade war to worsen.
GBP/USD: Outperforming despite the uncertainty, but not by much
Volatility was relatively low for this pair as well, with its price range-bound but failing to undo its mid-term bear trend line, even if the pound outperformed against the greenback for the week. Yet, retail long positions have increased, and institutional bias while extreme short has dropped a couple percent due to an increase in pound long positions by 3,470 lots and an insignificant drop in pound short positions. The technical outlook remains consolidatory but with ongoing long-term negative bias, but keep in mind as we approach the Brexit deadline that any rumors or news in that regard could infuse the pair’s price with more volatility. Brexit talks are set to resume today ahead of the October 11 exit proposal deadline.
USD/JPY: Yen tops the performance charts last week, keeps negative technical bias in place
The yen outperformed compared to the remaining FX majors last week, and with the greenback underperforming it was a lower finish that has aided its long-term bearish technical bias. Overall however, the safe haven yen benefitted from significant risk-off plays earlier in the week, though should equities recover further, and this pair’s price could find a leg to stand on. Retail bias was in the middle at the start of last week, and the price drops have enticed shorts into taking profit and longs into entering, taking the bias back to majority long albeit modest levels. CoT bias on the other hand is at a near exact opposite majority short 57%, with an increase in both yen long and short positioning to the tune of 12,134 and 11,000 lots respectively failing to cause much of a change.
USD/CAD: Ongoing consolidatory moves befitting its consolidatory overview that’s showing more positive technical bias
Although the US dollar underperformed, the Canadian dollar (CAD) lagged the most against the FX majors, pushing this pair’s price above its 50-week moving average and giving its technical overview more positive bias on both the daily and weekly, with the latter enjoying a positive Average Directional Index (ADX). The catalyst for the move however, remains CAD’s energy underlying, with oil prices dropping further into the red for the week. Should energy find its footing, and this pair’s price could easily be in for retracement back down on CAD strengthening. Retail bias is 5% higher since the start of last week at a heavy short 74% as long positions continue to dwindle, while institutional bias remains close to the middle with an increase in CAD longs by 5,980 lots and shorts by 4,245 lots.
AUD/USD: Mid-term support level holds but technical bias remains negative for now
Although it was a brief scare for the Australian dollar last week breaking its mid-term support level following the Reserve Bank of Australia’s (RBA) 0.25% rate cut, it has managed to lift itself back up to end the week largely where it started with both AUD and USD relatively underperforming against most of the rest. Retail bias is up 9% since the start of last week, and institutional bias remains to the short side rising a notch on an increase in AUD shorts by 5,812 lots outdoing a smaller increase in AUD longs by only 665 lots. From a technical standpoint, its bear trend channel on the weekly remains intact, with little needed to shift its overview to an initializing bear trend.
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