The Daily Edge is authored by Ivan Delgado, 10y Forex Trader veteran & Market Insights Commentator at Global Prime. Feel free to follow Ivan on Twitter & Youtube weekly show. You can also subscribe to the mailing list to receive Ivan’s Daily wrap. The purpose of this content is to provide an assessment of the conditions, taking an in-depth look of market dynamics – fundamentals and technicals – determine daily biases and assist one’s trading decisions.
Authored by Ivan Delgado, Head of Market Research at Global Prime. This report intends to unveil the directional bias the smart money is supporting based on the latest changes in market positioning by leveraged, non-leveraged, commercials, small and large funds, asset managers, and dealers (unhedged traders). If one wishes to gain further insights into how to read the CoT data I publish every week, read the following report (primer).
It was an unequivocal negative read for the Euro on the week ending Nov 27th. Open interest kept increasing to the tune of 5.6k contracts while the majority of the volume was concentrated on sell-side candles. Large specs were appealed to gain additional sell-side exposure by the increase of net shorts, even if most of the variations were found in the reduction of large specs longs. Leverage funds saw an even greater increase in the overall short positions, but again, this was as a result of over 8k long contracts bailing. Commercial accounts barely budged as we continue stuck in old ranges. Interestingly, you’d have expected dealers to increase longs as a means to hedge short exposure via products offered to clients, but the opposite was true. Lastly, asset managers were almost unchanged. Overall, the report from last week carried negative connotations but until we break outside of the current 1.1250-1.15 range, the actionable insights out of the CoT may be limited unless at the extremes of the range, which is where players are finding the best-discounted prices to capitalizes on the current period of distribution.
For the last few weeks, trading GBP futures has quieted down as reflected by the paltry changes in open interest. For the week ending on Nov 27th, which was characterized by downward pressure for most of the 5 days captured in the COT report, open interest was reduced by 2.1k contracts, with the majority of volume concentrated to the downside. Both long and short specs liquidated positions for the week, with commercial accounts also reducing their overall net position even if the price ended lower for the week. This development should be considered an anomaly as commercials should have increased as the price ended lower, hence it suggests these account types were playing cautiously expecting lower levels. Leverage fund shorts closed positions to the tune of 5k, further reinforcing the notion that the mve laks meat on the bone. As per dealers and asset managers, no noticeable changes to highlight.
Open interest for the week ending Nov 27 increased by over 6k contracts, with the majority of volume concentrated on the sell-side candles and increasing. Large specs, in line with the overall trend, kept adding new shorts, while commercials were obviously busy buying yens on weakness, which is the standard behavior one would expect. Total dealers added new longs, taking the net total to nearly 120k. On the contrary, asset managers reduced their exposure, with both longs and shorts being reduced by about 3k to an aggregate of -22k total. Overall, it was a negative week for the yen, even if the dicey US-Sino relationships and the conces over the US curve inversion have proven to be a burden too significant to ignore, leading to renewed interest to be a buyer on the Japanese Yen.
During the week ending Nov 27, we saw a reduction of over 6k contracts in open interest. The price action in the Aussie during those 5 days was inconclusive, with volume largely balanced between buyers and sellers. As a result, large specs longs and shorts dialed down their exposure, with minor activity by commercials as well, given the lack of incentives to further hedges amid such a tight range. A similar picture to the one seen in large specs was confirmed by leverage funds, who bailed out of their positions from -24k down to -21k. Meanwhile, dealers saw no changes whatsoever, while asset managers tued less bearish by reducing their shorts by nearly 2k contracts while longs closed positions by just 0.7k.