Weekly CFTC COT Forex Positioning: Yen Is Still On The Offensive!

The latest Commitments of Traders forex positioning report from the CFTC shows that the U.S. dollar had a mixed performance, but the yen is still making some headway against the U.S. dollar. Moreover, calculations from Reuters, reveals that the value of net long positions on the Greenback for the week ending September 1 slumped further from the previous week’s $23.99 billion to $21.61, which is the lowest level since July of last year.

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 (Sept. 1, 2015)

CFTC COT Forex Positioning (Sept. 1, 2015)

Lemme break down the latest numbers for y’all:

  • After successfully breaking the Greenback’s domination, non-commercial forex traders decided to trim their bullish bets on the pound, causing the pound to sink back into the red against the Greenback.
  • The Greenback continues to lose ground to the yen. This marks the third consecutive week of declining net bearish bias on the yen.
  • Both euro bulls and euro bears pared their bets on the euro, but more bulls were unwinding their positions. As a result, the euro slightly lost out to the U.S. dollar for the week ending September 1.
  • The Swiss franc finally saw a net decrease in bearish bets for the first time since it lost out to the Greenback about a month ago.
  • Large speculators are still net bearish on the comdolls, but they cut down their bearish bias on the Aussie and the Loonie while increasing their net bearish bets on the Kiwi.

Concerns over China ensured that risk aversion was the dominant market sentiment until the week ending September 1. This risk-off sentiment convinced many forex traders to flee to the safe-haven currencies, with Japan being the safe-haven currency of choice yet again.

The U.S. dollar didn’t get as much love from forex traders, though, since China’s troubles continued to dampen expectations of a highly anticipated rate hike, especially after Federal Reserve Bank of New York President William Dudley’s statement that a September rate hike is “less compelling.”

As for the Swiss franc, it looks like forex traders were fleeing to the safe-haven Swissy’s sweet bosom too. After all, speculators did trim their net bearish bets on the Swiss franc. But as it turns out, the net decrease in bearish bias was largely due to Swissy shorts getting squeezed out since non-commercial short positions decreased from 17,486 to 13,945 while longs only increased from 4,889 to 5,442.

Pressure on the Swissy shorts was likely due to positive data from Switzerland, especially Q2 Swiss GDP expanding by a surprisingly better-than-expected 0.2% (-0.1% expected, -0.2% previous).

Moving on, the prevailing risk-off sentiment probably convinced forex traders who have been bullish on the high-yielding pound to take some profits off the table since the bullish bets on the pound shrank from 58,051 to 47,801.

As for the other high-yielders, the Kiwi naturally got pinched by risk aversion and New Zealand’s ginormous $649 million trade deficit. Positioning activity on the other comdolls was a bit wonky, though. Canada, for example, is now in a technical recession and oil prices were mostly down during the week ending September 1, yet speculators decided to cut their short positions on the high-yielding Loonie from 89,267 to 84,083.

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.