FX CFTC CoT sentiment data; Where will volatility come from next?


A quick note on the sentiment of traders coming from futures data from the CME reported by the CFTC.

Traders are bearish EUR, JPY and CHF, with net positions of ‐$10bn, ‐$8bn and ‐$1bn, respectively and bullish GBP, AUD, MXN, NZD and CAD; with net positions of $4.5bn, $3.4bn, $2.7bn, $1.3bn and $1.0bn.

However, Camilla Sutton, Chief FX strategist at Scotiabank commented that this week’s data is interesting as it provides the first warning signal for EUR bears and GBP bulls as the EUR
short position failed to build and traders began to close out GBP longs.

These crowded positions in EUR and GBP could signal an uptick in trading activity this week as there is a slew of economic data from the heads of central banks speaking to employment reports, and U of M consumer sentiment data from the US coming out this week. Traders also remain stubbornly short JPY (as you can see on the chart), with a BoJ press conference scheduled for Tuesday. All of the ingredients are in place for volatility to pick-up this week, thus leading for opportunists to enter and exit the market. Brokers and traders alike should see a pick up in volume as the FX winds should be strong this week among many of the major pairs.

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FX CFTC CoT sentiment data; Where will volatility come from next?

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