Weekly CFTC COT Forex Positioning: Greenback Still Under Pressure!

The latest Commitments of Traders forex positioning report from the CFTC shows that the U.S. dollar had a mixed performance against its forex rivals, but the Greenback is still feeling the pressure since calculations done by Reuters show that the value of net dollar longs for the week ending September 22 slightly decreased to $20.48 billion from the  previous week’s $20.97 billion.

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. 22, 2015)

CFTC COT Forex Positioning (Sept. 22, 2015)

Lemme break down the latest numbers for y’all:

  • The Swiss franc slipped back into negative territory after winning out against the Greenback last week due to large speculators reducing their long contracts from 19,039 to 13,722 while the number of short contracts remained largely the same.
  • The pound is finally winning out against the Greenback again after losing out three weeks ago.
  • Forex traders increased their long positions on the Loonie from 28,509 to 40,901. This now marks the fifth consecutive week of decreasing bearish bias on the Loonie.
  • Large speculators sent the Aussie deeper into the red by cutting the number of long contracts from 59,117 to 42,666.
  • Non-commercial forex traders trimmed their net bearish bets on the euro and the yen, but they did the opposite for the Kiwi.

The U.S. Fed’s decision to delay a highly anticipated (and slightly over-hyped) September 17 rate hike was the most likely reason for the continued bearish pressure on the Greenback. Although the U.S. dollar later staged a post-FOMC rally and Atlanta Fed President Dennis Lockhart came out saying that a rate hike “this year” is still in the cards, which helps to explain why the value of net dollar longs for the week ending September 22 only slipped by a tiny bit.

As for the Greenback’s forex rivals, the rate hike delay (and earlier expectations of a rate hike delay) allowed risk aversion to plant its flag firmly in the forex market, so demand for the safe-haven Japanese yen and Swiss franc began to increase. But Swissy longs probably chickened out when the Swiss National Bank (SNB) downgraded its inflation expectations for 2015 and 2016 in its September 17 rate statement. Well, that or Switzerland’s trade surplus declining in August, which throws a wrench into the SNB’s projections.

The risk-off sentiment also sent the high-yielding comdolls lower, but the Loonie managed to find some buyers probably because of surging oil prices at the time due to reports that U.S. drillers were reducing the number of operational oil rigs. As for the large net absolute change for the Aussie, Pip Diddy reported that the Aussie began slumping hard across the board due to a “well-circulated IMF report, which claimed that Australia would be the hardest-hit advanced economy due to slowing Chinese investment growth.”

As for the pound, it probably attracted some buyers because of a string of positive economic data such as the jobless rate decreasing to 5.5% (5.6% expected, 5.6% previous), the average earning index growing by 2.9% (2.5% expected, 2.6% previous) and retail sales coming in as expected at 0.2% (0.0% previous).

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.