On Monday, Bank of America (BofA) provided information on potential actions by commodity trading advisors (CTAs) in the coming week.
According to BofA, CTAs may continue to sell the US dollar (USD) against most currencies, following a trend that emerged after the Consumer Price Index (CPI) report led to a weaker dollar. The bank’s models show that long positions in the US dollar have declined this week.
The bank’s analysis shows that in the foreign exchange (FX) market, CTAs are likely to continue with short covering in the euro (EUR), British pound (GBP) and Canadian dollar (CAD).
In addition, CTAs are expected to increase their recently opened long positions in the Australian dollar (AUD) and potentially open long positions in the Mexican peso (MXN), given the strength of the positive peso trend.
In the commodities sector, despite gold prices rising last week, the precious metal trended lower, prompting CTA to sell, albeit at a slower pace. BofA expects this trend in gold and oil sales to continue into next week.
The analysis also noted that CTA’s long positions in aluminum are approaching extremely high levels, while long positions in aluminum are being wound down. In contrast, soybeans experience short cover.
The bank’s report serves as an indicator of how trend-following traders can adjust their portfolios in response to market movements.
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