COT: British Pound Short Position Shrinks at Furious Pace

What’s inside:

  • Large speculators net-short position in the British pound was reduced by record amount
  • Euro net selling for a second straight week despite range, to continue if support breaks
  • Futures positioning profile charts for major currencies & markets

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Every Friday the CFTC releases the Commitment of Traders (COT) report, which shows traders’ positioning in the futures market as it stands for the week ending on Tuesday. Displayed in the table below are the net positions of large speculators (i.e. hedge funds, CTAs, etc.); the change in their positioning from the prior week and where the net position stands relative to its 52-week range.

Noteworthy developments

British pound – With the recent surge in sterling there has been a massive change in the net-short position held by large speculators – the largest on record. The nearly 36k contracts purchased brought their net-short position to its smallest level since they flipped from long to short back in November 2015. While still short just over 10k contracts that could soon flip to net-long in the next weekly report. GBPUSD is currently at an interesting spot from a resistance standpoint (post-‘Brexit gap/2014 trend-line) and could pull back from here, but if we continue to see cable move higher then look for large trend-followers to jump onboard in hopes of catching a broader trend higher.

GBPUSD: Weekly

Euro – The past month has brought range-bound trading conditions in the euro as it’s become trapped between the 2012 low and a trend-line rising up from April (see the weekly technical forecast for details.) Large speculators appear to be losing faith in the prevailing trend since earlier in the year as momentum stalls. They have reduced their net-long position by over 33k contracts in the past two weeks, with 23k of those contracts being shed in the most recent one-week period. The reported net position of 62.7k contracts is the smallest since the last week of June when large specs were holding 58.7k contracts. Should we see a breakdown below key support look for this figure to decline even further.

EURUSD: Daily

The COT report is a longer-term sentiment indicator – for a short-term view on sentiment, check out IG Client Sentiment data.

Other futures contracts and large speculator positioning:

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