Bank of America (BofA) on Monday provided insight into potential actions for commodity trading advisors (CTAs) next week.
According to Bank of America, CTAs may continue to sell the US dollar (USD) against most currencies following the trend that emerged after the Consumer Price Index (CPI) report led to dollar weakness. The bank's models indicate that long US dollar positions have declined this week.
The bank's analysis indicates that in the foreign exchange market, preferential trade agreements with short covering in Euro (EUR), British Pound (GBP) and Canadian Dollar (CAD) are likely to continue.
Additionally, there is an expectation that CTAs will increase their recently established long positions in the Australian Dollar (AUD) and possibly initiate a long position in the Mexican Peso (MXN), given the strength of the positive peso trend.
In the commodities sector, despite the rise in the price of gold last week, the precious metal's trend has softened, prompting CTA to sell, albeit at a slower pace. Bank of America expects this trend of selling gold and oil to continue during the next week.
The analysis also indicated that long positions in CTAs are approaching very high levels, while long positions in aluminum are being eliminated. In contrast, soybeans suffer from short covering.
The bank's report serves as a measure of how trend-following traders adjust their portfolios in response to market movements.
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