Well Well, comrades! It’s time again! CFTC COT: This week I brought to you the following:
- EURUSD – FIRST WARNING SIGNAL
- AUDUSD – STILLBORN BULLISH TREND
- GBPUSD – IT’S TIME
- NZDUSD – NO MAN’S LAND
- USDCAD – CORONA GAP REVISITED
- USDCHF – BEAR PRESSURE STILL MOUNTING
- USDJPY – A TALE OF TWO PLAYERS
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EURUSD – FIRST WARNING SIGNAL
In a huge show of power, bulls cornered bears and pulled net contracts near to the limit we talked last week. The first warning light is on. COT Index is at 50 what implies an imminent commercial selling climax. In other words, commercials are approaching their previous selling limits. A selling(commercials) | buying (non-commercials) exhaustion may soon follow, along with a trend change. Another way to read this is that the current commercial net position is withing 10 percent of the most bearish net position over the last 3 years.
During uptrends, COT Sell signals are usually premature, but they are always telling us something. I always say that trading is an investigation, you search for clues that will lead you into conclusions. Right now we know the following:
- Commercials COT Index Selling Climax
- Non-Commercials Net Positions near previous High
- Next supply zone at [1.17417-1.18152] – We are just 100 pips from there
[1.17417-1.18152] Region become the next barrier for bulls and the last hope for bears. Also, another interesting thing to note is that the last extreme in net position in the past 5 years was 147318 Net long and we are now at 129685: 13.59% difference from there. From where the price is now 1.16550 to the top of the supply zone 1.18152 is 1.1374%. At least an interesting statistic.
Last Net Position | EXTREME NET POSITION | DIFF% |
|---|---|---|
| 129685 | 147318 | +13.59% |
Last close | TOP OF SUPPLY ZONE | DIFF% |
|---|---|---|
| 1.16550 | 1.18152 | +1.1374% |
what I am expecting
CFTC COT shows most of EUR crosses are at extremes too, and if we don’t have further development in all this coronavirus bullshit we will see EURUSD touching 1.18 maybe with a wick near 1.18500 and returning back to 1.14.
AUDUSD – stillborn BULLISH TREND?
Go back in the previous week’s CFTC COT Forex Weekly Report and check the chart posted for AUDUSD. 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. Why? Well, we saw a huge breakout price and volume, but longs were closed and shorts were added. This looks a lot that stop-loss were triggered and the pain train for bulls is selling tickets.
While your preferred technical analyst may say “longs are safe while we hold above 0.70” I would say to stay out of longs and wait for 0.70 get taken to start the shorts.
last week’s view
WHAT I AM EXPECTING
The purple candles are what I am expecting for the next two weeks.
GBPUSD – IT’S TIME!!!
In the best UFC style, longs and shorts are practicing the art of fighting. Longs added? Shorts added! Last week longs won!? This week’s shorts did. Round by round the open interest is increasing and the rope is getting even more stretched.
WHAT I AM EXPECTING
GBPUSD target for July is already fulfilled 1.27200. This next week is the end of the month and,as we all know, it’s the time when money managers take profit to increase the funds returns and get a bigger performance fee :D! Historically speaking August is a negative month for the Britsh Pound. On average it drops by 0.68%.
With the above in mind 1.26 is on the card again for the next 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 – corona gap revisited
While last week we saw a complete lack of interest by bulls and bears in trading CAD the figure changed. CFTC COT open interest increased and the long net position is smaller, this happens at an interesting technical level: The Corona gap. The bets increased for a big move, some are buying expecting price to rebound from here but the majority are beating in downtrend continuation, one that can push prices to 1.30 level.
The RSI and COT Index on top of Commercials net positions are showing an increasing appetite for longs, and at this point, you MUST already know that commercials are counter-trend traders.
what I am expecting
While net position still long I can’t see bulls in control. At the first signal that the support will not hold they will fold and accelerate the down move in the best long squeeze style!
USDCHF – BEAR PRESSURE STILL MOUNTING
Last week we saw how bulls were getting cornered by bears and the pressure continue! Open interest increased and still a shy move by longs. The expected Low for July 0.9191 will be reached this next week. The problem for longs is August is negative for USDCHF. On average it drops by 0.19% with a historical range from low to high of 574 pips. One positive point is the demand zone that price is about to enter is very strong and its holding since 2015.
what I am expecting
The actual level of price is extremely strong, there are tons of reasons that I will not discuss here, but it will be defended again. Trying a position long here is a good idea.
It’s always a good idea to compare what we are expecting for next week with what we were expecting for this week. Take a look at previous week CFTC COT Forex Weekly Report
USDJPY – A TALE OF TWO PLAYERS
USDJPY is the best DARK style and its two possible Worlds.
Deine Welt und meine Welt
Last week I said the expected low for July was 105.470, we touched 105.684 and rebounded after that. Well, open interest, longs, and shorts increased. The thing is in percentual longs added 18.4% while shorts 13.57%.
With the above in mind and with a supply zone that is getting respected since 2018 I would say that shorts will be squeezed, and 110 would get a new visit. The thing is August is a very negative month for USDJPY, on average it drops by 0.63%. So I do not discard a visit sub 105.
what I am expecting
That’s it! Guys, it gives a lot of work to prepare this report. The only thing I am asking in return is for you to share it on your social network! At the bottom of the post there are buttons that with one click you send it to twitter, Instagram and others.
Best regards
Leo Hermoso
