Futures Positioning Argues for Swiss Franc Strength Going Forward

US Dollar Index: The composite COT has dropped from high levels, which warns of a top.  However, with speculative longs gradually decreasing and now back to more normal levels, confidence in a top is low.               

Implications: neutral

EUR: Composite COT remains near historically low levels, which is suggestive of a bottom.  However, speculative shorts have gradually declined and positioning is not considered extreme anymore, which decreases confidence in a contrarian play.

Implications: neutral

GBP: The interpretation of the British Pound COT numbers are the exact same as the interpretation of the COT numbers for the Euro.

Implications: neutral

CHF: The 52 week index is back at 0 (which warns of a bottom (USDCHF top), positioning is no considered extreme.

Implications: bullish (USDCHF bearish)

JPY:  Bottoms in the USDJPY occur when speculators are extremely long the JPY (short USDJPY), which is not yet the case.  Positioning is getting closer to extreme but is not at the level that is considered extreme.  Continue to favor Yen strength.

Implications: bullish

CAD:  CAD positoning is neutral.  The Composite COT is near 0, which tells us little regarding sentiment.

Implications: neutral

AUD:  Composite COT is at a level that previously indicated an important low (March 2006).  This combined with the turn up from 0 in the 52 week index favors strength.

Implications: bullish

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: bullish

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