Summary:
- The newest CFTC report brings some major changes among major currencies
- It suggests an end of the US dollar rally might be just around the corner
- AUD looks the most oversold major currency
Every week the US Commodity Futures Trading Commission provides us with an update of positioning changes across currencies, commodities and other financial instruments. While the prior releases did bring no huge shifts, the latest one did so sending first signals that the recent US dollar surge may come to an end relatively soon.
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The Australian dollar is the most oversold major currency based on the CFTC data. Source: Bloomberg, XTB Research
The beginning of this week trading has been quite tepid in case of the US currency as it keeps trading relatively flat, being down solely against the Japanese yen on the back of a risk-off mode following a Trump’s tweet released over the weekend. However, weighing the USD latest performance against the latest CFTC report may imply the end of the dollar’s rally could be around the corner. First and foremost, the data showed a massive decrease of euro long net positions slumping from 88k to 36k, the lowest since May 2017. Nevertheless, the long net position was present quite a long time, hence we have yet to experience a significant drop at the chart above (it depicts a number of standard deviations from the 2Y average).
Moving on, the British pound net longs were trimmed by 30k entering a negative territory and reaching -19k. After the last week the net long position on the GBP reached the lowest level since October. The same scenario was seen in the Australian dollar were net shorts increased notably from 15k to 43k, the lowest since December 2015. Last but not least, the NZD net positioning did decline from +7k to -16k hovering around its lowest levels over the recent years. At the same time the US dollar net positioning bumped up to 18k touching its highest point since June 2017. To sum up, one may notice that investors have substantially increased their involvement in the US currency dumping longs elsewhere. Having said that, it does not mean that this trend is bound to last much longer, as the CFTC also serves as a contrarian indicator, therefore a pullback in the greenback over the coming weeks could be on the cards.
CFTC data together with a technical landscape makes the Aussie an encouraging trade opportunity. The pair drew a reversal candlestick which could herald the end of the downtrend begun at the end of January. If so, the first resistance bulls may face is localized at around 0.75 followed by subsequent Fibo retracements. Source: xStation5
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