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CoT Highlights:

  • USD speculative longs pared for the most part
  • Crude oil selling continues, with potential for more
  • Large speculator profiles for other major currencies/markets

See the IG Client Sentiment pagefor a timelier look at sentiment in major currencies and markets.

The Friday CoT report, despite the US Dollar Index (DXY) contract still gaining long interest, showed USD selling against most currencies – Euro, Pound, Australian Dollar, New Zealand Dollar, and Swiss Franc. There was some light buying versus the Canadian Dollar and Japanese Yen. Speculators continue to purge oil contracts as the net-long held for some time continues to quickly shrink, a trend which may continue if certain technical developments soon take hold.

On Fridays 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.), excluding small speculators and commercial traders.

‘Large specs’ are known to typically employ trend-following strategies, and as such, they tend to add to long positions and reduce shorts in uptrends while reducing long positions and increasing shorts 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 data table for large speculators

See what fundamental and technical drivers are at work in the Q4 Trading Forecasts.

USD speculative longs pared for the most part

Large specs added to their net-long US Dollar Index (DXY) position for a 7th week in a row, but against most major currencies there was a reduction in bullish bets. EUR saw its net-short held by large speculators shrink by nearly 10k contracts to -37k, GBP reduced by a similar amount to -47k, AUD short fell over 6k contracts to just shy of -60k (still near a historical extreme), large specs bought 4k contracts to bring their NZD short to -21k, and the CHF net-short was reduced by over 1k to -18.6k contracts. There was a very small amount of selling in CAD, a whole 159 contracts which netted out to -2.8k in all. JPY was the other major contract which saw its short increase, growing by 13k to over 102k.

Last week’s reversal in the Dollar through the end of the week is likely to show more of the same in the next report. Furthermore, momentum is in favor of a short-term correction in USD at this time.

US Dollar Index (DXY)

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Euro

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

British Pound

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Japanese Yen

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Canadian Dollar

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Swiss Franc

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Australian Dollar

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

New Zealand Dollar

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Crude oil selling continues, with potential for more

The drop in crude has saw a very overly bullish crowd of speculators reduce their net-long at quite a pace. With the price of oil having fallen so sharply so fast, selling may come to a halt as oil attempts to put together an oversold bounce.

As discussed last week's CoT update, the 4-week rate of change has been one of the fastest additions or reductions in a net position on record. Only a handful of other occasions met or exceeded the pace, with the prior times generally leading to a pause or some type of counter-trend move.

We may see crude try and hang onto the uptrend dating back to 2016, but trend support is in serious jeopardy of breaking (along with the 1998 slope). If trend support breaks then a move to the mid to lower-40s and another round of major reductions in longs could be in store in the not-too-distant future.

Crude Oil w/Positioning Chart (Trading around trend support)

Crude oil w/large spec positioning and long-term trend support

Other markets:

Gold

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Silver

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

Copper

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

S&P 500 (E-mini)

Weekly CoT Update – Sellers in USD, Crude Oil Speculators Keep Hitting Bids

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