The following are the key takeaways from this week’s COT report as provided by Scotiabank. (Data in this report cover up to Tuesday July 28 & were released Friday July 31.)
Bullish USD sentiment has held flat w/w at $33.4bn, stalling a rise that had begun in mid-June. The bulk of this week’s changes were observed in GBP, EUR, CAD and AUD, with a narrowing of bearish positions in the former two and ongoing deterioration in the latter.
EUR sentiment has shown a material improvement for the first time in six weeks, the net short narrowing $1.1bn to $14.4bn on the back of short covering as well as a second consecutive build in longs. The turn highlights a risk for EUR as we note that it remains the largest held net short, nearly double that of the next largest—the $6.4bn short JPY position.
JPY sentiment has held relatively flat, with risk being pared from both the long and short side in consideration of shifting risks. Vulnerability for JPY relates to sentiment and is most relevant to JPY shorts.
CAD bears have also built their short positions steadily since late May, suggesting a rising expectation for continued currency weakness.
The CAD net short remains larger than that for AUD, an atypical dynamic, with the latter showing a $0.7bn widening in the net short to $3.7bn.
FX Sentiment Chart