CFTC COT Forex Positioning: No More Dollar Domination?

It looks like this year ain’t shaping up to be a good sequel to the blockbuster 2014: Year of the Dollar, as the Greenback is having trouble sustaining its climb. Let’s take a look at the latest CFTC Commitments of Traders Positioning Report to find out what Mr. Market Sentiment has to say about potential dollar trends:

CFTC COT Positioning (April 14, 2015)

CFTC COT Positioning (April 14, 2015)

If you’re feeling overwhelmed by all these figures, you might need to review our School of Pipsology lesson on How to Gauge Market Sentiment Using the COT Report.

As you can see from the table above, most forex market participants stayed net short on the Japanese yen, euro, pound, Australian dollar, and Canadian dollar. Compared to the previous week, non-commercial traders trimmed their long dollar bets against these currencies, particularly for the euro.

Perhaps this indicates that forex traders are still hopeful that the Greek debt drama can avoid a tragic ending, which could involve a default, a Grexit, euro zone debt contagion… or all of the above. If all goes well during the Eurogroup meetings later this week, market watchers could continue to reduce their short euro positions against the dollar.

In contrast, short Aussie bets were increased as speculators had been pricing in weaker data from China last week. And taking the latest remarks from RBA Governor Stevens on the likelihood of further AUD depreciation and keeping monetary policy accommodative, it seems that this bearish bias could get stronger.

Overall, this COT Positioning Update hints that the Greenback could still have a fighting chance against most of its forex counterparts. While weak U.S. figures are to blame for the recent dollar selloff, risk aversion and the prospect of a Fed rate hike sometime this year could continue to keep the lower-yielding currency supported in the longer run.

Feel free to share your thoughts on the most recent COT Report below in the comments section.  If you’re looking for further discussion, community member ForExchange has a lively thread, Trading based on Market Sentiment, in the forums awaiting your participation.

  • ForExchange

    Hi Ninja,

    I like a lot how you summarized the COT findings with the current fundamental viewpoints combining with Forex Gump´s articles. Great article, thanks for sharing.

    FE

    • Thanks for checking out my blog update! Yep, I think it helps to have a look at the different pieces of the puzzle to see how the bigger picture is looking.