Speculators are extremely long US dollars and short all major currencies except the Yen. This is a dollar bearish signal.
US Dollar Index: The 52 week index remains at 100 following the rollover to the December contract. The difference between speculators and commercials is its largest ever. The environment remains ripe for US dollar weakness.
Implications: Bearish
EUR: The index is at 0, indicating exteme pessimism. The composite COT is at --85,180 (largest ever). Also, the percentage of commercials that are long is at its all-time high now at 74.23%. All indicators point to EURUSD strength.
Implications: Bullish
GBP: The 52 week COT index is also at 0. This reading indicates a bearish sentiment extreme, which is bullish for the GBP. 85.9% of commercials are long! That is a level not seen since February 2002 when the GBPUSD was near 1.40 (see the arrow).
CHF: The 52 week index is at 0 and 89.6% of commercials are long. This is a strong bullish signal for CHF (bearish USDCHF).
Implications: Bulish
JPY: The index is at 47, having bounced from near 0. This is a Yen bullish signal (USDJPY bearish). Tops in USDJPY occur when speculators are extremely short the JPY (long USDJPY).
CAD: The 52 week index is at 10 and has been near 0 for weeks. Recently, I wrote that “Cad lows tended to occur when the composite COT was in the -60,000 range. This is where composite COT was 2 weeks ago. Also, close to 70% of commercials long tended to singal CAD lows. The reading 2 weeks ago was 68.3%. In other words, look for a CAD low (USDCAD top) soon.” The outlook for CAD strength remains bullish.
AUD: The AUD index is at 0, which indicates a bearish extreme. Composite COT, at -35,895, is the lowest it has ever been (the previous low was in March 2006, which was an important low).
NZD: The NZD index is at 0. Speculators are net short the largest amount of NZD that we have on record (the record only goes back a few years though). These are bullish signals.
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