Weekly CFTC COT Forex Positioning: U.S. Dollar Reigns Supreme

Reuters estimates that the value of net long positions on the U.S. dollar jumped to $32.77 billion from $29.79 billion last week, which is the highest level since June and the first time in eight weeks that the Greenback holdings managed to claw its way above the $30 billion mark. Moreover, the latest Commitments of Traders forex positioning report from the CFTC reveals that the U.S. dollar is the one currency to rule them all, but it looks like a challenger is about to appear – the pound.

Keep in mind that these numbers show the net positioning of non-commercial traders against the U.S. dollar. 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 in order to learn how to pinpoint potential forex market reversals.

CFTC COT Forex Positioning (August 4, 2015)

CFTC COT Forex Positioning (August 4, 2015)

Lemme break down the latest numbers for y’all:

  • After several months, the Greenback has finally won out against ALL its forex rivals.
  • The Swiss franc was pushed into the red after several weeks of futile resistance.
  • Non-commercial traders slightly trimmed their net bearish bias on the Aussie and the Kiwi, but remain committed on shorting the Loonie versus the Greenback.
  • Speculators dumped the Japanese yen for the third consecutive week.
  • Euro bears came back from their vacation, wiping out the euro’s gains against the U.S. dollar from last week.
  • Forex traders are lightening up their bearish bias on the pound, further reducing their net short positions against the Greenback for the third consecutive week now.

The primary drivers for the U.S. dollar’s strength were probably the FOMC statement and the advanced estimate for Q2 2015 U.S. GDP coming in at 2.3% (2.6% expected, -0.2% previous) since both events reinforced the idea among forex traders that a September rate hike is still in the cards.

Speaking of hawkish central banks, the preliminary estimate for Q2 2015 U.K. GDP came in at 0.7% as expected (0.4% previous) while July’s U.K. manufacturing PMI printed a 51.9 (51.4 previous), so forex traders were probably banking that the Bank of England’s MPC members would have a vote ratio of 7-2 for those wishing to hold rates versus those who want to hike rates. Of course, we now know what really happened.

Moving on, I may be the sneakiest ninja in the forex world, but I have to say that the Swiss National Bank (SNB) is pretty darn sneaky too. Why? Well, while the returning risk-on sentiment was squeezing forex traders out of their yen and Swissy long positions, the SNB was probably busy trying to weaken the Swiss franc too given that the SNB’s foreign currency reserves ballooned to CHF 531.8 billion from CHF 516.0 billion. This piece of juicy intel came out after the week ending on August 4, but traders seemed to have had an inkling about the SNB’s moves before the numbers were printed.

As for the comdolls, the Loonie got double-slapped by declining oil prices and Canada’s May 2015 GDP contracting by 0.2% (0.0% expected, -0.1% previous) while the Kiwi was apparently supported by the returning risk-on sentiment and remarks from RBNZ Governor Wheeler that further rate cuts may be unnecessary. The Aussie, meanwhile, got a boost when the phrase “Further [Australian dollar] depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices” was found missing in August 4’s RBA rate statement.

Got any other conclusions you can draw from this latest COT Report? Feel free to share your thoughts in the comments section or if you’re looking for further discussion, community member ForExchange has a lively thread called Trading based on Market Sentiment in the forums awaiting your participation.