Oil, Gold, USD, GBP, Yen COT report breakdowns & interpretation #fx #oott

 

We are seeing a 5Y extreme net bullish positioning from non commercial speculators. I would want to see bids at $40-46 forced out first, however. This means that a drop of about $13 is available. We have a slight Wyckoff bottoming pattern. I remain bullish above $36 long term on oil (WTI).

Gold

Looking at PA and the reduction in longs over Q4 2016 indicates that we aren’t in for a bull run any time soon. Wyckoffian schematics indicate a move to $1,050. Currently hitting a rounded resistance retest of a key low volume break below support, I would continue shorting gold with a stop above $1,260, target of $1,050 for a 3:1 risk to reward trade.

USD

Dollar longs have remained stable over the past few months. Open interest had increased due to the Trump USD rally. Trump’s team has said the dollar is too high very recently. External to this, USD LIBOR rising could be causing investors to shy away from USD denominated assets over the next few months as dollar hedging costs become too great relative to potential yields. I’d expect the dollar to stay within current ranges of 96-104 for the foreseeable future, however longer term I still remain bearish. What could change this is a) NAFTA terms being reassessed b) changing geopolitical situations c) Trump does something even more mental that has longer term economic implications.

Sterling

Sterling shorts have been covered since November. This is most interesting to me due to the perceived general public fear over a GBP crash when Article 50 is triggered. This could suggest that in reality, sterling would be in for a rally if you want to look at recent sentiment regarding the pound. We’ve had a pretty large spike in bearish volume at lows back before Christmas. A spike in volume at relative lows or highs can sometimes indicate a reversal, but I wouldn’t put too much credence into that. The ‘fat finger’ low at 1.1945 has not been taken, however I am basing my stucture off of the lows at 1.21 and 1.20. A hold above 1.20 I will remain bullish, however I expect a ranging market where sellers will be absorbed over the next few months.

Yen

Similar PA to gold here (understandably). Non-comms are net short Yen. How long they’ll maintain this for is another question if we start experiencing risk offish behaviour in other assets. Yen on a longer term picture is more interesting –

Below 0.80 and we could see 0.70. If 0.80 holds, however, Yen bid is on, even if this is totally detrimental to the BoJ’s aims.

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