Commitment of Traders (COT): CAD & USD Longs, GBP Shorts Fall

The latest Commitment of Traders (COT) report for the week ended November 12 has been released by the CFTC. According to the COT report, speculators have reduced their USD longs and GBP shorts, with USD net longs down to levels not seen since July. A possible phase 1 deal is pushing currency flows out of the USD and into higher-yielding currencies.

Net shorts on the JPY also increased to the early June levels as optimism about a US – China trade deal unwinds safe haven plays. The same is responsible for the increase in the CHF net shorts positions for the third consecutive week.

The Commitment of Traders report also chronicles a drop in the net short positions on the GBP to their lowest levels since late May. UK polls put the Conservative Party solidly ahead of its rivals heading into the elections, and a Tory-controlled House of Commons could pave the way for an orderly Brexit. This is something the GBP is benefitting from.

The surprisingly dovish outlook from the Bank of Canada has caused a scaling back of net long positions on the CAD. The BoC Governor Poloz effectively left the door open for a future rate cut in his last rate statement.

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Technical Playbook: GBPCAD

The scale-back in GBP short positions and CAD long positions is playing out on the GBPCAD, where the pair has broken above the ascending triangle in an upside push on the daily chart.

The immediate upside target could be the former neckline of the February 2019 double bottom at 1.72788. However, price needs to break the 27 May and 29 May highs at 1.71362 to attain that level.

On the flip side, the two lows that constitute the Feb 2019 double bottom formation at 1.69844 (also the lows of May 30 and June 4) could be the next downside target. This area may come into focus if the GBPCAD loses steam at its present resistance.

Fundamentals from Canada, news around Brexit as well as the UK election polls will continue to provide direction for this pair.More content