Dollar Turns From Sentiment Extreme

Latest CFTC Release Dated August 11, 2009:

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, indicating a turn from a bearish sentiment extreme.  Sentiment extremes occur at bottoms so favor the upside

Implications: bullish

Euro

EUR: The 13 week index has turned from 100, which indicates a turn from a bullish sentiment extreme.  Favor the downside.

Implications: bearish

British Pound

GBP: The 13 week index has turned from 100, which indicates a turn from a bullish sentiment extreme.  Favor the downside.

Implications: bearish

Australian Dollar

AUD: The 13 week index is at 100, which indicates a bullish sentiment extreme.  Tops tend to occur in close proximity to readings of 100.

Implications: topping / topped

New Zealand Dollar

NZD:  The 13 week index is at 100, which indicates a bullish sentiment extreme.  Tops tend to occur in close proximity to readings of 100.

Implications: topping / topped

Japanese Yen

JPY:  The 13 week index has dropped from 100 to 25 in the past 3 weeks.  Previously bearish (USDJPY bullish) due to the sentiment extreme as indicated by 100, sentiment conditions are now neutral.  

Implications: neutral

Canadian Dollar

CAD: The 13 week index has turned from 100, which indicates a turn from a bullish sentiment extreme.  Favor the downside.

Implications: bearish (USDCAD bullish)

Swiss Franc

CHF: The 13 week index is at 100, which indicates a bullish sentiment extreme.  Tops tend to occur in close proximity to readings of 100.

Implications: bearish (USDCHF bullish)

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) and the DFX Trend Index every day after the NY close.  He is also the author of Sentiment in the Forex Market.  Follow his intraday market commentary at DailyFX Forex Stream.  Contact Jamie at jsaettele@dailyfx.com