CFTC COT: Forex Weekly Report 03-08-2020

Well Well, comrades! It’s time again! CFTC COT: This week I brought to you the following:

  • EURUSD – THIS TIME IS DIFFERENT
  • AUDUSD – YOGI BEAR
  • GBPUSD – ROUND ONE
  • NZDUSD – NO MAN’S LAND
  • USDCAD – LOSSES AND PROFITS
  • USDCHF – RESPAWN
  • USDJPY – SpaceX MODE

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EURUSD –  this time is different

EURUSD is now stretched in all the metrics you can imagine.

  • NET POSITIONS
  • BUYING POWER
  • OPEN INTEREST
  • COT INDEX

Even the projection of non-commercials net position using half-life is saying we are hovering the top. We could easily say that just a miracle can save EURUSD from big profit-taking. I want to add an extra remark about Open Interest peaking:

Trend changes often coincide with peaks in open interest. The importance of the trend change is often proportionate to the size o f the peak. (BRIESE, 2008, p. 51)

From now on the profit-taking mode is on. If you are a scalper sharpen your tool to trade SHORT. If you are a swing trader it’s time to prepare yourself for a big and fast drop. The thing is you should have a bearish bias, that’s what data is telling us, and as the dollar, data is king.

I would like to introduce a new concept. This weekend I spent time coding seasonality tools into a class and applied it to non-commercials net positions. The most correlated year to 2020 is 2009, or in other words, the year when non-commercials had more similar behavior to 2020 is 2009.

Letting aside how cool the tool is, the fact is in 2009 at the exact period of the year we had huge profit-taking. The big question I make you all:

IS THIS TIME DIFFERENT!?

WHAT I AM EXPECTING

This time this section is redundant! 😀 The previous supply zone in the [1.13461-1.14967] will work like a magnet and it’s the next liquidity zone. We are heading there!

CFTC COT EURUSD EXPECTED PRICE MOVEMENT
CFTC COT EURUSD EXPECTED PRICE MOVEMENT

AUDUSD – YOGI BEAR

You will remember from last week CFTC COT Forex Weekly Report I said:

 “The move was exactly what we expected, but price and net positions must walk together, and what I can see looking to data now is a huge bull trap mounting on AUDUSD”

I was not wrong. The price made a false breakout and went down. Non-commercials (big speculators) added big to their shorts AND, no longs were closed. Bull Trap! We will see a fast and sharp move to the downside. You will also note the increase in open interest.

CFTC COT AUDUSD NET POSITIONS
CFTC COT AUDUSD NET POSITIONS

WHAT I AM EXPECTING

Longs are in a very delicate situation. In their favor, there’s the fact they have huge profits in the longs they hold. This adds to my thought that a sharp and fast move to the downside is looming.  Once their profits start to evaporate a herd movement will follow.

CFTC COT FOREX AUDUSD EXPECTED MOVEMENT
CFTC COT FOREX AUDUSD EXPECTED MOVEMENT

GBPUSD – ROUND ONE

Price went up and bulls used the opportunity to take profits. On the other hand, shorts added. With this kind of behavior is hard to see the price going up from here. A big pullback is highly expected.

  • Net Short position increased by 31.72%;
  • Seasonality is Bears favorable.
  • 2020 is mimicking the 2010 price movement.

WHAT I AM EXPECTING

The next liquidity zone that will attract buyers again is at [1.26698-1.28131] and I am pretty sure we will see these levels this week.

NZDUSD – NO MAN’S LAND

Like I said in the previous week there is absolutely no new development for NZDUSD that worth commenting on. I am leaving cot charts and positioning for your appreciation.

USDCAD – LOSSES AND PROFITS

Bears cornered bulls and pushed prices lower, even with a lot of stop loss triggered there was no strong conviction from bears that prices could continue heading lower.

  • Bull takes losses
  • Bears profits
  • Open Interest decreased

This complete lack of interest from both groups put in a situation where I expect nothing for this pair until the next data release.

The most interesting part is this is not a unique situation, if we look at seasonality charts we will see that trading sideways at this period of the year is a common behavior for CAD.

USDCHF – RESPAWN

Last week I comment about the crescent bear pressure, but with this happening in a very strong demand zone. The thing is we saw an increase in net shorts positions, but not because specs added to shorts, but because they closed longs, probably stops on last Tuesday movement.

While I write this price is being sent up and I think its non-commercials closing longs. This demand zone is strong and a reference price level. If we look at seasonality charts both prices and cot we will see that a pullback is expected from here. I am holding a bullish view on USDCHF.

Commercials are playing a beautiful bearish pattern. In fact they at a level where the trends start to reverse. The Non-Commercial and Commercials position are not summing zero. The non-reportable traders are holding a very big short position and this will also add fuel to the bullish recovery.

WHAT I AM EXPECTING

A move to the upside is highly expected as we are sitting at a very  strong demand zone and with a lack of conviction from sellers.

CFTC COT FOREX USDCHF EXPECTED PRICE MOVEMENT
CFTC COT FOREX USDCHF EXPECTED PRICE MOVEMENT

USDJPY – SPACEX MODE

USDJPY triggered the “Possible Bottom” Cot Index Signal. This means a commercial buying climax and a trend change may follow. Remember this rule:

Fund buying and selling fuels uptrends and downtrends, respectively, while commercial buying halts downtrends and commercial selling caps price rallies. (BRIESE, 2008, p.59)

You may say that the non-commercials position increased and I agree, but the fact is these are levels where trend changes and big specs take profit.

According to the price seasonality, the upside move is delayed. So it’s possible we start to see it this week.

A word of caution:

  • August is usually a good month for JPY (BAD USD)

WHAT I AM EXPECTING

I expect prices going above 107, but we are in a very delicate zone and situation. The support most hold, otherwise I am pretty sure that more shorts are being added and we can see 103 price level, however, I think this possibility highly unlikely.

CFTC COT FOREX USDJPY EXPECTED PRICE MOVEMENT
CFTC COT FOREX USDJPY EXPECTED PRICE MOVEMENT

VALUE MY WORK

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Best regards

Leo Hermoso

3

Comments (4)

Vamshi Janapala

Awesome Leo. Thanks

Thank you!

Héctor Manuel Samperio Islas

As usual, great analysis!
Thanks for sharing Leo.
Greetings from México!

Thank you Héctor!

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