Weekly CFTC COT Forex Positioning: Dollar Domination Is Over!

The latest Commitments of Traders forex positioning report from the CFTC shows that the U.S. dollar’s domination is finally over after three consecutive weeks of lording over its forex rivals. In addition, calculations done by Reuters, reveals that the value of net long positions on the Greenback for the week ending August 25 drastically dropped from the previous week’s $32.26 billion to just $23.99 billion, which is the lowest since mid-June.

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 25, 2015)

CFTC COT Forex Positioning (August 25, 2015)

Lemme break down the latest numbers for y’all:

  • The pound finally has the high ground against the U.S. dollar, breaking the Greenback’s domination in the process.
  • The yen had the largest absolute change in positioning, thanks to yen shorts getting squeezed out, with short positions for the yen dropping from 136,065 to 98,981 for the week ending August 25.
  • Non-commercial forex traders drastically eased their bearish bias on the euro for the second consecutive week.
  • The U.S. dollar still managed to advance against the Swiss franc and the Aussie dollar. but lost out to the other comdolls.

The Greenback’s strength began to falter when forex traders got wind of the news that Uncle Sam’s CPI was not up to par. This was exacerbated by the Fed’s not-so-hawkish tone, as revealed in the latest FOMC meeting minutes.

Things then took a turn for the worse during the global market meltdown during the so-called “Black Monday” of August 24, when the Dow Jones Industrial Average plunged by around 1,000 points during the open, dragging the U.S. dollar with it as hopes for a September rate hike got crushed.

The Greenback was not the only victim of the global market meltdown since the Aussie dollar also got dragged down due to concerns over the Chinese economy and a retreating commodities market. The other commodity dollars, weren’t hit as hard, though, probably because both Canada and New Zealand already had a string of better-than-expected data under their belts when the meltdown occurred. And in the case of the Loonie, it got a nice boost when oil prices staged a rally after slumping to six-and-a-half-year-lows.

Moving along, forex traders began having a more positive attitude towards the euro, thanks to Greece unlocking its third bailout, but demand for the euro started ramping up when the market turmoil and prevailing risk-off sentiment sent forex traders scurrying to the euro and the yen, with the yen being clearly the safe-haven of choice among most forex traders. Forex traders weren’t too optimistic on the Swiss franc, though, since the increase in net short positions was mostly due to non-commercial longs trimming their positions from 8,183 to 4,889.

As for the pound, it got some love when CBI upgraded its growth forecasts for the U.K. from 2.4% this year and 2.5% next year to 2.6% this year and 2.8% next year. Moreover, Forex Gump pointed out that the British economy is actually doing quite well.

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.

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  • ForExchange

    Amazing how JPY turned the trends in most charts. It will be interesting to look back later if it only had to do with risk off sentiment and was only a correction or we have really seen reversals.

    • Yep that was a really big move for the yen in the past month. I’m also looking forward to see how it all pans out until the end of the year to gauge if that was a temporary move or the start of a reversal. Were you able to hop in a JPY setup?

      • ForExchange

        Yes, I was trading it vs. NZD and CHF. Really nice moves and hundreds of pips in a couple of weeks.

        FE

        • Congrats! Think we’ll see more yen strength this week?

          • ForExchange

            Maybe vs. comdols I think. I do not even think about it vs. other currencies.

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