Weekly CFTC COT Forex Positioning: Dollar Bulls Strike Back!

After three straight weeks of decreases, calculations done by Reuters show that the value of net dollar longs finally saw a $1.25 billion increase, bringing the total value of net dollar longs to $21.73 billion. In addition, the latest Commitments of Traders forex positioning report from the CFTC shows that the U.S. dollar was able to claim victory against all its forex rivals, although a couple of currencies were able to gain some ground against the Greenback.

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. 29, 2015)

CFTC COT Forex Positioning (Sept. 29, 2015)

Lemme break down the latest numbers for y’all:

  • The Greenback reigns supreme against its forex rivals once more!
  • After a short-lived victory against the Greenback last week, the pound slipped back into negative territory due to the number of short contracts increasing from 43,734 to 51,862.
  • Speculators were apparently undecided on the Swissy and the Kiwi since their respective absolute changes were the lowest, although forex traders ultimately reduced their bearish bets on the Kiwi while doing the opposite for the Swissy.
  • Non-commercial forex traders trimmed their long positions on the Loonie from 40,901 to 36,211, breaking five straight weeks of decreasing bearish bias on the Loonie.
  • Yen longs and yen shorts simultaneously pared their positions, but more shorts were unwinding their positions, which allowed the yen to somehow take some ground from the Greenback.
  • Large speculators increased their net bearish bias on the euro, but decided to cut down their short bets on the Aussie.

After getting their hearts broken by the U.S. Fed’s decision to delay a highly anticipated September 17 rate hike, interest rate junkies were probably enticed to buy up the Greenback again, thanks to a whole lineup of promising comments from various Fed officials.

Atlanta Fed President Dennis Lockhart got the ball rolling when he said that a rate hike “later this year” is still feasible. The real deal, however, was U.S. Fed Chairperson Janet Yellen’s September 24 speech and her statement that “Most FOMC participants, including myself, currently anticipate that achieving these conditions will likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter. But if the economy surprises us, our judgments about appropriate monetary policy will change.” In other words, a rate cut is still in the cards.

As for the Greenback’s forex rivals, demand for the euro probably got clipped when Germany and Spain both posted negative inflation readings, which threatened to push the entire euro zone’s inflation reading into the red as well (we now know that it did), which prompted forex traders to speculate on more easing moves from the ECB.

The pound, meanwhile, got dumped due to a slew of disappointing economic readings, which caused many forex traders and market analysts to believe that a highly anticipated Q1 2016 rate hike would be delayed.

As for the Kiwi, the Kiwi was able to put up a fight against the Greenback despite New Zealand’s poor fundamentals and RBNZ Governor Wheeler’s warning that “some further easing in the OCR seems likely.” The most likely reason for the Kiwi’s resilience was the release of New Zealand’s annual report, which happily reported that New Zealand’s economy “has performed much better than many advanced economies in recent years,” although the prevailing risk-on sentiment probably helped to create demand for the high-yielding Kiwi as well.

Speaking of risk sentiment, the return of risk appetite also created demand for the Aussie, but dampened demand for the safe-haven Swissy. As for the yen, I mentioned earlier that yen longs and yen bears were simultaneously trimming their positions, with more bears cutting down their positions than bulls. One likely reason for this is that the yen has remained relatively stable despite repeated calls for more easing measures from the BOJ during the week ending September 29.

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.

  • ForExchange

    Hi Forex Ninja,

    looking at the results of the NFP Report and checking price action, I guess in the next COT Report we will see how the USD will be beaten up by the commodity currencies. How do you see it?

    FE

    • Ha, yes! That’s the first thing I thought of upon seeing the latest NFP! Pretty solid turnaround we’ve been seeing these days, especially from AUD.