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CoT Highlights:

  • Dollar positioning continues persistent trend
  • US Dollar Index (DXY) on the verge of a bigger breakdown
  • Large spec profiles for major currencies and markets

For a timelier indicator of sentiment in major currencies and markets, see the IG Client Sentiment page.

The latest CoT report revealed yet another week of large speculators generally adding to their bullish bets. This also included an increase in a short gold position as well, where large specs collectively turned bearish for the first time since August 2002.

On Friday’s the CFTC releases a detailed report of traders’ positioning in the futures market as reported for the week ending on Tuesday. Outlined in the table below are key stats concerning the positioning of large speculators (i.e. hedge funds, CTAs, etc.). This group of traders largely employ trend-following strategies, and as such, their net long exposure typically increases in uptrends while net short positioning increases in downtrends. When analyzing the data, we take into consideration the direction of their position, magnitude of changes, as well as extremes.

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

CFTC CoT positioning data

Dollar positioning continues persistent trend

For an 18th consecutive week large speculators added to their US Dollar Index (DXY) position, and while this group of traders focuses more heavily on specific currency contracts, this incredibly persistent behavior demonstrates a generally overly bullish sentiment towards the dollar.

Large specs are short the euro by only 4.8k contracts, but this is coming from a record net-long earlier this year of nearly 149k contracts. Indeed a lot of selling. The net-short of 71k contracts held in the British pound is the largest bearish position in nearly 14 months. In other currencies such as the Australian dollar and Swiss franc you have to go back several years to find short positions with size rivaling today’s. And as mentioned earlier, large trend-followers haven’t been short gold since August 2002, which isn’t a direct dollar trade of course, but activity is certainly in line with the correlation between the currency and precious metal.

US Dollar Index (DXY) CoT Positioning

DXY CoT positioning chart

US Dollar Index (DXY) on the verge of a bigger breakdown

What makes the current scenario of even more interest is the alignment of a crowded trade and technical backdrop for the DXY. The rapid rise and decline out of a broad basing pattern (wedge) suggests the market is tired and a larger reversal could be in store.

The index is currently trading just below the prior breakout point and slightly beneath the trend-line rising up from April. If the DXY can’t get into gear in the days ahead and breaks the lower trend-line of the wedge, then look for selling to continue as a crowded room of longs heads for the exit at the same time.

See what fundamental and technical drivers are at work this quarter in the Q3 Trading Forecasts.

DXY Daily Chart (Poised to Continue Lower)

DXY daily chart, poised to continue lower soon

Large speculator profiles for major FX & markets:

Euro

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

British Pound

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Japanese Yen

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Canadian Dollar

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Swiss Franc

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Australian Dollar

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

New Zealand Dollar

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Gold

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Silver

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Copper

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

Crude Oil

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

S&P 500 (E-mini)

CoT: Bullish USD Bets Continue to Grow as Trend Comes into Question

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