The Commitments of Traders (CoT) Report

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According to preliminary figures for EUR futures markets, open interest rose by just 377 contracts on Thursday from Wednesday’s final 506,103 contracts. Volume, instead, dropped by nearly 4K contracts, partially offsetting the previous large build.

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CoT data ─ Week #51: Speculative positioning


CoT data ─ Week #51: Managed Money (Slow & Fast money) positioning

Latest NFCI Release (Last Updated: 01/03/19)
Index Points to Tighter Financial Conditions in Week Ending December 28

The NFCI ticked up to –0.70 in the week ending December 28. Risk indicators contributed –0.26, credit indicators contributed –0.31, and leverage indicators contributed –0.12 to the index in the latest week.

The ANFCI ticked down in the latest week, to –0.54. Risk indicators contributed –0.35, credit indicators contributed –0.38, leverage indicators contributed –0.06, and the adjustments for prevailing macroeconomic conditions contributed 0.25 to the index in the latest week.
The NFCI and ANFCI are each constructed to have an average value of zero and a standard deviation of one over a sample period extending back to 1971. Positive values of the NFCI have been historically associated with tighter-than-average financial conditions, while negative values have been historically associated with looser-than-average financial conditions. Similarly, positive values of the ANFCI have been historically associated with financial conditions that are tighter than what would be typically suggested by prevailing macroeconomic conditions, while negative values have been historically associated with the opposite.

“The NMI (Non-Manufacturing Index) registered 57.6 percent, which is 3.1 percentage points lower than the November reading of 60.7 percent,” ─ the ISM reported on Monday.

Key takeaways from the press release:

☛ This represents continued growth in the non-manufacturing sector, at a slower rate.

☛The Non-Manufacturing Business Activity Index decreased to 59.9 percent, 5.3 percentage points lower than the November reading of 65.2 percent.

☛ The New Orders Index registered 62.7 percent, 0.2 percentage point higher than the reading of 62.5 percent in November.

☛The Employment Index decreased 2.1 percentage points in December to 56.3 percent from the November reading of 58.4 percent.

☛ The Prices Index decreased 6.7 percentage points from the November reading of 64.3 percent to 57.6 percent, indicating that prices increased in December for the 34th consecutive month.

Executive summary:

The US performed well in 2018, but there are already signs of softer growth, particularly in the housing market and on capital spending. Political tensions remain high with the President highly critical of the Federal Reserve’s stance on monetary policy while the current government shutdown could be a prelude of more disruption to come now that the new Democrat-controlled House has been sworn in.

Nonetheless, it isn't all bad news. The tight jobs market means employees are finally feeling the recovery in the form of higher wages and more generous benefit packages. The plunge in motor fuel costs is another positive for consumer cash flow, while the ceasefire on US-China trade tensions offers some breathing room for business. With core inflation grinding higher we still see the scope for some additional Fed rate hikes, but they will be more modest than seen in 2018.
The Eurozone’s economic figures continue to disappoint. While the dispute over Italy’s budget has been resolved, trade wars and Brexit remain substantial risks to eurozone growth, which is already suffering from a slowdown in the emerging world. As the ECB’s growth and inflation forecasts are likely to be disappointed, the scope to raise interest rates seems very limited.

With less than three months until the UK leaves the EU, the economy is beginning to stall as Prime Minister Theresa May prepares to hold a crunch vote on her deal in mid-January. This looks set to be rejected by MPs, potentially opening the door to either a second referendum or a push towards the so-called ‘Norway option’. Nobody truly knows which option will prevail, but either way, some form of Brexit delay is looking more likely.

The Chinese economy is weakening, as shown by manufacturing surveys, but fiscal stimulus should soon be in place to counter the risk of rising unemployment in private enterprises. The central bank will use its new tool, the Targeted Medium-term Lending Facility (TMLF ) to provide lifelines to private and small companies. We are monitoring the yuan trend to confirm if it warrants a milder depreciation forecast in the wake of the change in the central bank’s exchange rate policy stance.
Japan’s economy was severely hit by the weather, with a partial recovery now being seen. However, inflation continues to undershoot expectations, while Bank of Japan rhetoric is keeping a lid on bond yields, although the real target may be to moderate yen appreciation.

The recent downturn in bond yields, prompted by political worries, may continue in the near term. However, we expect US yields shift back towards the upper end of their current range as concerns about core US inflation and rising issuance reassert themselves.

source: ing

Latest NFCI & ANFCI Release

You may use this tool to gauge the financial liquidity - more importantly look at the ANFCI values

 

1. When liquidity is tightening, take bearish trades. When liquidity is loosening, take bullish trades (USD centric).
2. Risk is a coincident indicator, credit is a lagging indicator, and leverage is a leading indicator of financial stress.

National Financial Conditions Index Reaches its Tightest Point Since April 2017 in Week Ending January 4, 2019 (EST)

After increasing for much of the second half of 2018, the NFCI leveled off at –0.71 in the week ending January 4, 2019, reaching its highest level since April 2017. Risk indicators contributed –0.26, credit indicators contributed –0.30, and leverage indicators contributed –0.15 to the index in the latest week.

The ANFCI ticked down in the latest week to –0.60. Risk indicators contributed –0.39, credit indicators contributed –0.35, leverage indicators contributed –0.13, and the adjustments for prevailing macroeconomic conditions contributed 0.27 to the index in the latest week.

The NFCI and ANFCI are each constructed to have an average value of zero and a standard deviation of one over a sample period extending back to 1971. Positive values of the NFCI have been historically associated with tighter-than-average financial conditions, while negative values have been historically associated with looser-than-average financial conditions. Similarly, positive values of the ANFCI have been historically associated with financial conditions that are tighter than what would be typically suggested by prevailing macroeconomic conditions, while negative values have been historically associated with the opposite.

According to preliminary figures for EUR futures markets from CME Group, investors added around 13.9K contracts on Wednesday from Tuesday’s final 514,545 contracts. In the same line, volume rose significantly for the first time after four consecutive drops, this time by around 80.6K contracts.

EUR/USD poised for a test of 1.1600 and above (source: forex crunch)
The wave of selling pressure around the greenback allowed EUR/USD to break above 1.1500 the figure and test 1.1570 during early trade. Rising open interest and volume accompanies the up move and opens the door for a potential visit to October’s peak beyond the 1.1600 mark.

The charts have a yellow background that indicates the square dimension of the chart. The orange dot indicates today's position relative to the high (top of chart) and low (bottom of chart) of the FX index during the last 365 days. So if the orange dot is close to the top, the currency is close to its highest valuation. If the orange dot is close to the bottom, the currency is near its lowest valuation. The blue bars indicate the distribution of valuations over the course of one year. The span between high and low valuation is divided into ten ranges (ie, deciles). Then the number of days during which the currency's valuation has been in each of these deciles is counted. The number of days is proportional to the width of each of the ten blue bars. Thus the position of the orange dot relative to the width of the blue bars indicates if the current valuation is a relatively common event or a relatively rare event. For example, if the bulk of valuations has been in the lower deciles, and the orange dot is near the top where the bars are narrow, the currency has recently moved up sharply. These charts ("FX conifers") are a simple method of visually summarizing the performance of a currency over the time period of one year. One useful feature of this chart is that it automatically adjusts for the different volatility of currencies, as the span between one-year high and one-year low is a reflection of a currency's volatility.

Source: https://fxtools.github.io/change/cumulative.html

10th Jan 2019: 1100 GMT:

Open interest in JPY futures markets rose by just 420 contracts on Wednesday vs. Thursday’s final 230,524 contracts, the third consecutive build according to CME Group flash data. Volume followed suit, up by nearly 19K contracts for the first time after three drops in a row.

USD/JPY looks south and beyond
Yesterday’s drop in USD/JPY was in tandem with rising open interest and volume, pointing to the likelihood of further upside in the Japanese safe haven, in turn exposing the pair to the resumption of the leg lower.

JAN 14, 2019 07:02 GMT

CME Group’s preliminary data for GBP futures markets noted open interest rose by around 3.2K contracts on Friday from Thursday’s final 209,422 contracts, extending the choppiness seen as of late. Volume, instead, ticked higher significantly by more than 50.3K contracts, offsetting the previous drop.


GBP/USD looks to consolidate above 1.28

Friday’s up move in GBP/USD was accompanied by rising open interest and volume, which should allow for a continuation of the bullish sentiment in the very near term. However, and as always, all eyes remain on Brexit and the crucial vote tomorrow.

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