Hey Ledges! I hope you all are doing great. Are you ready for another great week of trading!? The access to the dashboard I am building is open this week, just read till the end to get the link, don’t be an ass and jump directly to there.
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Big Speculators Net Position Big Movers
MAJORS POSITIONS
I want to share some excerpts I got from Bloomberg about oil and China.
OIL
Record crude exports and refinery runs along with stagnant oil production have combined to yield the biggest U.S. stockpile draw since September 2016
Iran says its oil customers won’t obey U.S. calls for a total halt of Iranian crude imports. OPEC won’t be able to provide 1 million barrels a day of additional supply and prices will rise to more than $100 a barrel very soon, it said.
CHINA
A potential financial panic is brewing in China, an influential state-backed think tank warned, pointing to bond defaults, liquidity shortages, and market tremors. Leveraged share purchases have reached levels last seen in 2015—when a market crash erased $5 trillion of value, according to the report from the National Institution for Finance and Development.
A tumble in the Chinese yuan that has blindsided currency forecasters is now triggering warnings of potential contagion. At one point today the yuan was down more than 0.5 percent against the dollar for the third day in a row. There’s also concern Chinese policymakers are less willing to temper the currency’s decline as the economy slows and a trade battle with the U.S. worsens.
EURUSD – RANGE SHOULD HOLD
July is a month of range for EURUD, but this does not mean lack of volatility, on the contrary, the historical range from low to high to EURUSD in July is 499.85 pips. I can see more clues that sell supply and buy demands will be the best strategy for next month. Let’s start with COT DATA:
EURUSD COT DATA
In more than 20 years of data, the non-commercials net positions hit the actual levels just a few times, really, 3 times. We know that non-commercials are the weak link of the chain. Just one word of advice we had a massive drop in open interest at the beginning of the year, so a massive breakout to the upside is not out of the card. Something like we saw in the middle of 2017.
Fundamental Score
The fundamental health scores, calculated with my proprietary indicator, for Euro Zone and the United States reflect whats is happening with EURUSD. USD lagged EUR on fundamental scores and EURUSD went up, and now, as EUR find a plateau in data USD is fastly finding good support in data and this will halt the EURUSD uptrend that we are seeing since the start of May.
USDJPY – POSSIBLE BOTTOM (Second week in a row)
Our dear and beloved UJ gives us another bullish signal. The big specs net position take profit zone was touched at the start of May, price reacted from there, but weak economic data from the USA prevented the pair to continue its march up.
I commented this week that a lot of volatility is expected for UJ in the following months as the spread between six- and three-month implied volatilities shows a steep jump around election day that persists into 2021.
If you remember in the last week’s FX Weekly Report I discussed the possibility for a bottom in USD, I also posted an excerpt from a Bloomberg report about bets on higher yields.
Full Excerpt:
The battle between speculators and longer-term investors over the fate of U.S. Treasuries is all but over, at least according to the futures market. With bearish hedge fund bets almost a mirror image of their institutional counterparts’ bullish wagers for much of the last two-and-a-half years, fast money positions are now almost completely neutral, according to the latest data from the Commodity Futures Trading Commission. Benchmark Treasury yields have collapsed to around the 0.7% level from a then seven-year high of 3.2% in 2018 — when the difference in positioning between the two types of investors reached a peak. Still, it’s noticeable that while hedge funds have quickly taken on board one of the first rules of markets — don’t fight the Fed — they haven’t turned net bullish Treasuries. Despite central bank bond purchases and concerns over the continuing impact of the coronavirus, expectations likely remain high among the fast money contingent that the U.S. economy will normalize and yields could soon push higher.
And finally, here’s what Leo’s interested in this week
GBPCAD – BULLISH BIAS
Last’s week main headlines about oil are something like a for loop
while True:
- print(“Oil prices remained weak on worries of oversupply and rapidly increasing coronavirus cases”
- print(” Inventory data published by the US EIA showed a build of xxx million bbl in crude oil stocks”)
As you all may know right now(if you don’t its time to look for a rope), CAD as a strong correlation with OIL prices. So if we look only to these headlines you already have a case for CAD bearishness, but let’s dig more.
Historically GBPCAD goes up about 0.3% in July, but a lot of volatility comes with it. The range from low to high is about 818 pips. This will give us a lot of retraces to compound our long position.
Taking a look at currencies fundamentals GBP and CAD did a strong cross at 18 of June, and after this more good data for GBP was released and more bad for CAD.
I use a technique that is well-know among those that do pair trading. The half-life of a series is how long it takes to return back to the average. I do apply this to non-commercials net positions and the bearish cycle for GBPCAD is about to end on 30 of June.
We have significant clues that GBPCAD can trend up to 1.7372 yielding us nice 400 pips.
Ledges this week I want to hear from you! The access to the dashboard I am developing is open. This is part of the promise I made some months ago about creating a platform similar to Reuters Eikon, remember?
I am a man of my word! You!?
This is not an easy task, but I am doing with a lot of pleasure. The purpose of the markets is to make it easier for smart people to get money and to make money distribution fairer. Once this is ready you will have access to the same tools institutions have. Now I need your help in 3 ways!
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