Takeaways From This Week's COT Report: USD Long Position At A Fresh Multi-Month Low

Data in this report cover up to Tuesday Feb 2 & were released Friday Feb 5. Data include the Fed and BoJ policy decisions as well as Fed VC Fischer’s comments.

The aggregate USD long position has fallen to a fresh multimonth low, dropping $5.4bn w/w to $20.9bn at levels last seen in late October. This week’s changes were largely driven by a moderation in bearish sentiment toward CAD and EUR, offset somewhat by a decline in the JPY net long.

All three changes are likely the result of shifting central bank policy risks as the position date incorporates both the Fed and BoJ meetings as well as public appearances from the Fed’s Fischer and ECB’s Draghi. 

The net short EUR position narrowed a remarkable $5.4bn to $11.9bn at levels last seen in mid-October. The position has narrowed nearly $12.5bn from the pre-ECB levels from early December with a nearly unbroken liquidation of shorts over the past 9 weeks. Rising confidence among bulls is also noted, with a three-week run of rising gross longs.

JPY sentiment deteriorated for the first week in six, with a $1.4bn narrowing in the net long to $3.9bn. Subsequent movement in JPY would suggest a reversal of this week’s changes. 

CAD sentiment improved materially, the net short CAD position narrowing $1.0bn to $3.7bn in a somewhat belated response to the BoC’s Jan 20 policy hold. Details include an overall paring of risk, as we note a decline in both long and short positions—suggesting uncertainty rather than confidence in the near term path for CAD. 

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