The latest Commitment of Traders report showed that the net USD long positions had spiked to the highest levels in 2 and a half years. The COT report, also known as the CFTC Positioning report, also indicates that the net short positions on the Euro had surged to levels that were last seen in June 2019.
These two actions are in direct response to opposing central bank actions. The Fed cut interest rates as expected but did not sound as dovish as the markets had expected. On the other hand, the ECB’s stimulus package is a dovish action which is now being absorbed by traders.
There was also a moderate decrease in the net short positions on the GBP as Brexit concerns have generally eased. The COT report also noted a moderate decrease in the net long positions on the JPY as the US-China trade impasse starts to assume a positive outlook. Similarly, traders have started to increase their net shorts on the CHF as a result of the recent intervention by the SNB in the forex market, and reduced safe haven activity.
Net long positions on the CAD also surged as a strong employment report strengthened the Bank of Canada’s continued hawkish stance on its economy.
Net short positions on the AUD dropped last week, but this may change as traders start to factor in the dovish statements from the RBA made last week.