In the latest CFTC Commitment of Traders report Scotiabank lines up the most pertinent details from the latest week. USD bulls are gaining momentum with the net position increasing to $38bn. Traders have been long USD since June; however the position was not broad, held almost exclusively in EUR and JPY. This week there was a change with the net position shifting to long USD against CAD, AUD and MXN; leaving only GBP held as net long. This broadening of momentum warns that the USD rally is strong and leaving the near-term risk favoring USD upside.
• CAD and AUD generated sell signals as the net positions shifted from long to short; with the net CAD short now at -$0.4bn and the net AUD short at -$0.2bn. This building out of position warns of ongoing downside pressure on spot.
• EUR positioning is bearish with the largest net short at $21.7bn. We note that sentiment has failed to deteriorate over the past month despite the continued decline in spot, warning that traders will need a catalyst to add to short positions. Meanwhile, GBP sen-timent appears to be stabilizing with a net position that has shown little movement in recent weeks as investors have shifted their focus back to fundamentals.
• JPY has the second largest short position at $13.8bn, and details suggest a renewed desire to short JPY given that bears have built their positions through 8 of the last 10 weeks.
To see the full COT report, click here.