€ Euro and Australian Dollar COT Positioning at Records

Latest CFTC Release dated May 08, 2012:
52 week Percentile / Comment (if applicable)
0 – commercial longs and speculative shorts at record levels
0 – commercials turn long and speculators turn short for first time since 2008 and record
0 - positioning difference is greatest since 2007
0 - positioning difference is greatest since 2008
0 – positioning difference is greatest since 2009
The COT Index is the difference between net speculative positioning and net commercial positioning measured. A light blue colored bar indicates that the difference in positioning is the greatest it has been in 52 weeks (bullish) with speculators selling and commercials buying. A light red colored bar indicates that the difference in positioning is the greatest it has been in 52 weeks (bearish) with speculators buying and commercials selling. Crosses above and below 0 are in bold. Non commercials tend to be on the wrong side at the turn and commercials the correct side. Use of the index is covered closely in detail in my book.
Charts
Non Commercials (speculators) – Red
Commercials – Blue
Small Speculators – Black
COTDiff – Black
Volume on bottom
***
The latest developments in positioning warrant additional comments. As you review the charts, keep in mind that the COT Index (bottom line) moves with price and extreme levels tend to give way to at least a countertrend move. This week’s open (USD gap lower) underscores this point. Expect continued 2 way action into early June.
US Dollar

Chart prepared by Jamie Saettele, CMT
Euro

Chart prepared by Jamie Saettele, CMT
British Pound
Chart prepared by Jamie Saettele, CMT
Australian Dollar

Chart prepared by Jamie Saettele, CMT
Japanese Yen

Chart prepared by Jamie Saettele, CMT
Canadian Dollar

Chart prepared by Jamie Saettele, CMT
Swiss Franc


Chart prepared by Jamie Saettele, CMT
Gold

Chart prepared by Jamie Saettele, CMT
Silver

Chart prepared by Jamie Saettele, CMT
Copper

Chart prepared by Jamie Saettele, CMT
Crude

Chart prepared by Jamie Saettele, CMT

Investors Already Positioning for Euro Breakdown; We Remain Sidelined

AppId is over the quota
AppId is over the quota
- Market optimism fades and suggests more USD strength

- Widespread calls for a break lower in Eur/Usd

- Key economic data and political risk ahead

- Focus for now on monthly US employment data

Although we have seen no clear breakouts in most of the major currencies, and although the Euro still remains locked in a very well defined 1.3000-1.3500 consolidation (that has defined trade for much of 2012), there is a growing sense that the markets are very close to a major pickup in volatility. For now, the breakout looks like it will be in the US Dollar’s favor, given the sharp downturn in risk sentiment this week, on the back of some very disappointing economic data across the globe. In fact, we can’t remember a time when so many were all at the same time, calling for a major US Dollar rally.

Relative performance versus the USD Friday (as of 9:30GMT)

GBP -0.02%

JPY -0.03%

CAD -0.05%

CHF -0.11%

EUR -0.12%

AUD -0.19%

NZD -0.20%

It is with this in mind that we also find it somewhat surprising to see the Euro still so well supported. While it is true that the ECB were slightly hawkish on Thursday, we doubt that this alone will keep the Euro propped above 1.3000. Yet the market remains supported for now, despite the overwhelming bearish sentiment out there. Other currencies like the Australian and New Zealand Dollars have not been as fortunate, yet these markets are also holding up rather well when you consider a 50bp rate cut from the RBA this week and some disastrous employment numbers out of New Zealand.

There is a good deal of economic data and event risk over the coming days, and the results from these calendar events could very well influence the direction in the markets. Kicking things off is the monthly US jobs report, and many are now expecting a disappointment here following the softer ADP report earlier in the week. From there, the attention will turn to the political front, when all will be watching the highly anticipated election results out of France and Spain. The big issue will be if the election results compromise the current plan which involves the implementation of IMF austerity measures.

As far as currency strategy is concerned, we would recommend remaining on the sidelines until a clearer directional bias presents. The fact that everyone is calling for a major USD rally is certainly compelling, but not enough for us to test the waters.

ECONOMIC CALENDAR

TECHNICAL OUTLOOK

EUR/USD: Overall, the market remains locked in a very tight directionless, choppy consolidation. Ultimately a break back above 1.3500 or below 1.3000 will be required for clearer directional bias. At this point, the market has stalled by some key resistance just ahead of 1.3300 to once again put the pressure on the downside towards the multi-day range lows down by 1.3000. Only back above 1.3500 would negate outlook.

USD/JPY: The latest pullback from the 2012, 84.20 highs is viewed as corrective and it looks as though the market could still see a bit more weakness before considering the possibility for the formation of a medium-term higher low. Overall, this is a market that has undergone a major structural shift in recent months and we now see the pair in the early stages of a longer-term up-trend. Ultimately, only a weekly close back under 78.00 would negate.

GBP/USD: Although the market had been very well bid in recent sessions, the rally looks like it might finally be closer to stalling out in favor of a bearish resumption. Look for a daily close back below 1.6150 to officially confirm, but aggressive traders may want to consider fading any strength beyond 1.6300 with daily studies starting to roll from overbought. Ultimately, only a daily close above 1.6400 would delay outlook.

USD/CHF: Our core constructive outlook remains well intact with the latest setbacks very well supported by psychological barriers at 0.9000. It now looks as though the market could be looking to carve a fresh higher low, and we will be looking for additional upside back towards the recent range highs at 0.9335 over the coming sessions. Above 0.9335 should then accelerate gains towards the 2012 highs by 0.9600 further up. Ultimately, only back under 0.9000 delays and gives reason for pause.

--- Written by Joel Kruger, Technical Currency Strategist

To contact Joel Kruger, email jskruger@dailyfx.com. Follow me on Twitter @JoelKruger

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Yen COT Positioning Most Extreme Since 2007

Latest CFTC Release dated March 26, 2012:

Week (Data for Tuesdays)	52 week Percentile / Comment (if applicable)
US Dollar	63
Euro	33
British Pound	67
Australian Dollar	57
Japanese Yen	0 – positioning most extreme since July 2007
Canadian Dollar	71
Swiss Franc	24
Gold	25
Silver	39
Copper	55
Crude	82

The COT Index is the difference between net speculative positioning and net commercial positioning measured. A light blue colored bar indicates that the difference in positioning is the greatest it has been in 52 weeks (bullish) with speculators selling and commercials buying. A light red colored bar indicates that the difference in positioning is the greatest it has been in 52 weeks (bearish) with speculators buying and commercials selling. Crosses above and below 0 are in bold. Non commercials tend to be on the wrong side at the turn and commercials the correct side. Use of the index is covered closely in detail in my book.

US Dollar

Euro

British Pound

Australian Dollar

Japanese Yen

Canadian Dollar

Swiss Franc

Gold

Silver

Copper

Crude