COT: Speculators Continue to Favor US Dollars

The difference in positioning between speculative and commercial traders remains large; indicating that a turn towards dollar weakness is probable.  

US Dollar Index: Speculators remain extremely long US dollars and commercials remain extremely short US dollars.  This is the type of environment that produces turns.     

Implications: Topping?

EUR: The 52 week index has turned up from 0, indicating potential for a bottom.  The composite COT was recently at its lowest ever, which indicates a pessimistic extreme.  Also, the percentage of commercials that are long recently turned from a record.  All indicators point to a EURUSD bottom forming soon.    

Implications: Bottoming?

GBP: The GBP COT numbers suggest that a bottom is close at hand.  The difference between speculative and commercial positioning was recently the largest it has ever been.  With speculators short and commercials long, this is a GBP bullish signal.

Implications: Bottoming

CHF: The 52 week index tuned up from 0 recently, but the composite COT is not at a level that typically precedes CHF lows (USDCHF tops).  There is not a strong signal either way.

Implications: Neutral

JPY:  in USDJPY occur when speculators are extremely long the JPY (short USDJPY), which is not yet the case.  Continue to favor Yen strength.

Implications: Bullish

CAD:  The CAD positioning is similar to the CHF positioning.  The COT index is near 0 but composite COT is not extreme when compared to the early USDCAD top.  Before the early 2007 top, USDCAD tops were accompanied by composite COT readings of roughly -50000.  This is where the composite COT is now.  Signals are mxed from a sentiment perspective.

Implications: Neutral

AUD:  The AUD index has turned up from 0 and composite COT was recently the lowest it had ever been.  The previous low was in March 2006, (which was an important low).  This is the environment that leads to formation of a low. 

Implications: Bottoming?

NZD:  The NZD index has turned from 0.  Speculators were recently net short the largest amount of NZD on record (the record only goes back a few years though).  These are bullish signals.

Implications: Bottoming?

Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week.  He is also the author of Sentiment in the Forex Market.

Contact at jsaettele@dailyfx.com