The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over a specific number of weeks (either 52 or 13). A reading close to 0 suggests that a bottom is forming and a reading close to 100 suggests that a top is forming. The readings are for the actual currency, not the currency pair. For example, a reading of 100 on the Canadian Dollar suggests that the Canadian Dollar is close to a top (USDCAD close to a bottom).
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
US Dollar Index: The 13 week index has increased from 0, which indicates a bearish sentiment extreme. Sentiment extremes occur near bottoms so expect a bottom and reversal in the USD.
Implications: bottoming
Euro
EUR: The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping
British Pound
GBP: The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping
Australian Dollar
AUD: The 13 week index is at 100, which indicates a sentiment extreme. A top typically accompanies index readings of 100.
Implications: topping
New Zealand Dollar
NZD: The 13 week index is at 100, which indicates a sentiment extreme. A top typically accompanies index readings of 100.
Implications: topping
Japanese Yen
JPY: The 13 week index is at 67 and has not been extreme recently, which is neutral.
Implications: neutral
Canadian Dollar
CAD: The 13 week index has rolled over from 100, indicating a turn from a bullish sentiment extreme. Sentiment extremes occur at turns so favor CAD weakness (USDCAD bullish).
Implications: bearish (USDCAD bullish)
Swiss Franc
CHF: The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping (USDCHF bottoming)
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.
Contact at jsaettele@dailyfx.com
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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