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CoT Highlights:

  • Euro large specs remain net-sellers as price backpedals
  • Massive crude oil long set to continue unwinding
  • Large speculative positioning profiles for major markets/currencies

For a measure of short-term sentiment in the Euro and other currencies and markets, see the IG Client Sentiment page.

This past week showed the fifth straight week of reduction in exposure in two contracts (euro & oil) where not long ago we saw record net-long positions held by large speculators. The largely trend-following group of traders are moving in reverse as markets ‘turn on them’. A trend which looks set to continue, especially in oil if it can’t rebound from its recent plunge as it has over the past year.

Each Friday, the CFTC releases an overview of traders’ positioning in the futures market as reported for the week ending on Tuesday. In the table below we’ve noted key statistics for net positioning among large speculators (i.e. hedge funds, CTAs, etc.). This group of traders are largely known to be trend-followers due to the trading strategies typically employed. The direction of their position, magnitude of changes, as well as extremes are taken into consideration when analyzing what their trading activity could mean about future price fluctuations.

Key stats: Net position, one-week change, and where the current position stands relative to the past 52 weeks.

CFTC CoT data

Euro large specs remain net-sellers as price backpedals

Euro large specs sold nearly 5.4k contracts during the most recent reported period, bringing their net-long down to 110k contracts from 151k contracts held just last month. It’s also the smallest position held since the end of 2017.

The down-move in the euro appears overdone in the near-term, but given the extremely hard thrust off the 2008 trend-line, the decline in recent weeks may be the beginning of a continuation of the larger downtrend off the 2008 high. If this is the case, any short to intermediate-term rebound in the single currency may not garner much speculative interest.

At 110k contracts, there is still plenty of inventory to offload which could further push the euro down in the weeks and months ahead.

Chart 1 – Euro Positioning (Shrinking, but still big)

Euro positioning

See how sentiment could tie into the Top Trading Opportunities in 2018

Chart 2 – EUR/USD Weekly Chart (Downtrend resumption?)

EUR/USD weekly chart, downtrend resumption?

Massive crude oil long set to continue unwinding

As we noted last week, large speculators were already reducing their record large net-long despite crude oil continuing to rise. Last week, we saw yet another reduction, however; that was before WTI fell by 8% following the end of the reporting period for positioning.

We should see an aggressive decline in long positions in the next report. What will be interesting to watch, is can crude quickly find a low and rebound as it has each time following a decline over the past year?

The last time we saw an aggressive decline of this magnitude (February), a low in oil was quickly found. Should we see oil fail to rebound as it has before, a turn in trend could be at hand, and with an enormous long speculative position still sitting on the books, there is plenty of fuel for a larger decline in the weeks and months ahead.

Chart 3 – Crude Oil Positioning (Remains historically large)

crude oil positioning

Chart 4 – Crude Oil Daily Chart (Quickly bottom or fail to rebound?)

US crude oil daily chart, bottom or fail to rebound?

Large speculator profiles for major FX & markets:

US Dollar Index (DXY)

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Euro

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

British Pound

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Japanese Yen

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Canadian Dollar

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Swiss Franc

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Australian Dollar

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

New Zealand Dollar

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Gold

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Silver

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Copper

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Crude Oil

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

S&P 500 (E-mini)

CoT: EUR/USD & Crude Oil Speculators Sell for Fifth Straight Week

Resources for Forex & CFD Traders

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX