Speculative USD Longs Lowest since December

The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over a specific number of weeks (13). A reading close to 0 is bearish if the currency in question has reversed from a uptrend and is bullish if the currency has been declining for a significant amount of time. A reading close to 100 is bullish if the currency in question has reversed from a downtrend and is bearish if the currency has been rallying for a significant amount of time.

Readings of 95 and higher as well as 5 and lower are in boldfaced red type to indicate potential market extremes. For example, an increasing index is bullish until the index is extreme (near 100), at which time the risk of a reversal or pause in the trend increases.

US Dollar

The USD COT index is at 0, which indicates a bearish extreme. Speculative USD longs reached a record level in February, so beware of a sharp sell-off. 52 week rate of change (bottom indicator) remains constructive however. After crossing above its -75th percentile in December, ROC is holding up.

Euro

The Euro COT index turned from 0 several weeks ago but the currency has traded sideways. A turn from extreme pessimism either leads to sideways consolidation before resumption of the downtrend or a reversal to the upside. In this case, favor the former.

British Pound

The Pound COT index is at 83 after turning from 0 several weeks ago. As mentioned in the Euro section comments, a turn from extreme pessimism either leads to sideways consolidation before resumption of the downtrend or a reversal to the upside. In this instance, evidence favors the reversal.

Australian Dollar

The Aussie COT index turned from 100 last week, which indicates potential for a reversal. Turns from 100 either lead to consolidation before the uptrend resumes or a reversal. 52 week ROC has been above its 75th percentile since October, which increases the probability of a reversal occurring.

New Zealand Dollar

The NZD COT index is at 100 again, which indicates extreme bullishness. Respect the potential for additional strength until the index rolls over.

Japanese Yen

Yen sentiment has turned from a bearish extreme (0). Turns from 0 lead to either consolidation before resumption of the downtrend or a bullish reversal.

Note-this is a chart of the Yen futures contract, not the USDJPY (the inverse of this chart would look similar to the USDJPY).

Canadian Dollar

The index is no longer at 100 but CAD strength has continued. Not until price shows signs of reversing should one attempt to fade CAD strength. 52 week ROC is above its 75th percentile but is declining (which warns of a reversal).

Note-this is a chart of the CAD futures contract, not the USDCAD (the inverse of this chart would look similar to the USDCAD).

Swiss Franc

The most recent bearish extreme for the CHF was at the end of February. Price has held that low so far, so continue to favor the upside.

Note-this is a chart of the CHF futures contract, not the USDCHF (the inverse of this chart would look similar to the USDCHF).

Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Friday evenings), technical analysis of currency crosses on Monday, Wednesday, and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum.  He is the author of Sentiment in the Forex Market.  Follow his intraday market commentary and trades at DailyFX Forex Stream.   Send requests to receive his reports via email to jsaettele@dailyfx.com.