US Dollar, EUR/USD, USD/JPY, COT Report –Analysis
- Euro Setback Risk Lingers as Positioning Remains in Overbought Territory
- GBP/USD Bears Ease
- Commodity Currencies Signal Reflation Theme is Alive
The Predictive Power of the COT Report
How to Read the CFTC Report
Source: CFTC, DailyFX (Covers up to October 6th, released October 9th)
Euro Vulnerable to Setback Amid Overbought Positioning – COT Report
In the week September 30th-October 6th, the latest CFTC data continued show to a squeeze in USD shorts, which saw a reduction of $2bln against G10 currencies. Keep in mind however, that this does not take into account the 1% fall in the DXY after the reporting week. Alongside this, while overall bearish bets in the USD is at a two month low, positioning remains sizeable.


Recommended by Justin McQueen
Download our fresh Q4 USD Forecast
The bulk of the positioning change had been observed in the Euro as net longs were slashed by $2bln with gross longs liquidated and gross shorts picking up slightly. That said, with Euro positioning in overbought territory, there remains a persistent risk that the Euro is vulnerable to pullbacks, particularly as the ECB continue to fret over the strength of the Euro. However, with markets pricing in a democrat sweep in the US election, investors appear reluctant to depart with their significant exposure in the Euro.
Net shorts in the Pound eased slightly as optimism over a EU-UK trade deal continues to grow. Despite both parties stating that significant gaps persist. Beyond the headlines there is a sense that progress is being made and given that investors sit on the short side, a breakthrough can see the GBP/USD jump to 1.32-1.33 with EUR/GBP falling below 0.88. Elsewhere, across the commodity currencies, the reflation theme had been evident with investors buying up high-beta currencies as odds of a Biden presidency increased.


Recommended by Justin McQueen
Improve your trading with IG Client Sentiment Data
US Dollar |
EUR/USD |
GBP/USD |
USD/JPY |
USD/CHF |
USD/CAD |
AUD/USD |
NZD/USD |
For a more in-depth analysis on FX, check out the FX Forecast