Weekly CFTC COT Forex Positioning: Dollar Domination, Baby!

Net long positions on the Greenback (based on calculations from Reuters) jumped even higher to $37.19 billion from $32.77 billion last week, which is the highest level since the third week of April. In tandem with this, the latest Commitments of Traders forex positioning report from the CFTC reveals that the U.S. dollar is still the king (or queen, if you like) of the forex world. In addition, the pound’s challenge to the mighty Greenback was proven to be rather short-lived.

Keep in mind that these numbers show the net positioning the 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 11, 2015)

CFTC COT Forex Positioning (August 11, 2015)

Lemme break down the latest numbers for y’all:

  • The U.S. dollar is still the one currency to rule them all, making gains against all its forex rivals, except the Kiwi.
  • After three straight weeks of trimming their bearish bets on the pound, large speculators decided to do the opposite, easing the pound’s threat to the U.S. dollar’s domination.
  • The Swiss franc was pushed even deeper into the bearish territory after finally losing out to the Greenback last week.
  • Non-commercial traders continued dumping the Japanese yen for the fourth consecutive week.

After a rocky start, post-NFP demand for the dollar remained steady when the market finally determined that the Fed may still be on track for a rate hike. In addition, the devaluation of the Chinese yuan certainly gave a boost to the Greenback.

The PBOC’s currency depreciation efforts also sent the Aussie and the Japanese yen lower, as forex traders tried to price-in the event’s potential effect on the competitiveness of Australian and Japanese exports. Aside from that, the rather large net increase in bearish bets for the yen can also be attributed to a string of downbeat Japanese data.

Moving right along, analysts who were were counting on two or three MPC members to vote for a rate hike were probably dismayed that the Bank of England was not as optimistic. Instead, an 8-1 vote ratio came out, and forex traders responded by dumping the pound pretty hard.

As for the noticeable increase in net short positions for the Swissy, I already mentioned last week that forex traders already had a hunch that the Swiss National Bank (SNB) was sneakily manipulating the market again. When the SNB’s foreign currency reserves showed an increase from 516.0 billion CHF to 531.8 billion CHF, forex traders reacted by sending the Swissy even lower, probably because they were expecting the SNB to continue weakening the Swissy.

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.