The US dollar’s prayers were finally answered, rallying across-the-board vs major foreign currencies amid a stronger than anticipated US Non-farm payrolls number. The greenback managed to unwind severely oversold conditions vs the (FX) majors even though sentiment eased back for the most part, according to the latest COT (Commitment of Traders) report (as of August 1st). The most significant move in the FX market was with the Japanese yen, as the percentage of long (futures) positions of speculators improved dramatically for the first time in 7 weeks. This enabled the net percentage to move back up to a paltry 20%, highlighting an improvement off a 2-year. The number of gross short positions (vs the yen), fell for the 2nd straight week, allowing for the net (position total) to increase by another 9K.Â
According to retail trader data provided by Oanda Corporation, the retail population continues to fade yen strength, pushing the overall percentage of bulls down to 36%. While this is near the year’s low in yen (retail) optimism, the previous two times the percentage reached these levels, the yen grinded higher the subsequent few weeks. Moreover, while Friday’s non-farm beat produced a marginal breakout for dollar bulls, the technicals for the USD/JPY continue to highlight a potential double top formation. Look for the USD/JPY to test the mid-108 region while the 112 handle caps to the upside.
The net long tally for euro (futures) speculators dropped again for the 2nd straight week, despite reaching another fresh 18-month high vs the US dollar. The gross long position edged lower off the recent record high, allowing for the net percentage (64% long) to drop, suggesting a potential ceiling may have developed in (speculative) optimism for the euro. That said, according to the latest data from Oanda, retail traders remain rather unwilling to commit to the euro’s recent rise. As such, continued retail pessimism should induce a move towards the 1.2140 region (EUR/USD) once overbought technical readings have fully unwound.
