Weekly CFTC COT Forex Positioning: Dollar Bulls Take a Breather!

After five straight weeks of increases, the value of net long positions on the Greenback finally took a step back from the previous week’s $44.04 billion to $43.47 billion for the week ending on Dec. 1, according to calculations done by Reuters. Moreover, the latest Commitments of Traders forex positioning report from the CFTC shows that the Greenback had a mixed performance, losing some ground to most of its forex rivals while gaining some ground at the expense of the Loonie, the Swissy and the euro.

Keep in mind that these numbers show the net positioning 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 (Dec. 1, 2015)

CFTC COT Forex Positioning (Dec. 1, 2015)

Lemme break down the latest numbers for y’all:

  • The U.S. dollar still reigns supreme against most of its forex rivals, with the exception of the ever defiant Kiwi, which even managed to edge up against the Greenback.
  • Net bearish bets on the Aussie got trimmed for the second straight week due mainly to non-commercial forex traders cutting their Aussie shorts from 103,182 last week to 94,711 for the week ending on Dec. 1.
  • Euro longs increased their positions on the euro from 76,296 contracts to 78,782, but they were overwhelmed by euro shorts who pumped up their positions from 251,780 contracts to 261,627.
  • Speculators pared their bearish bias on the pound by increasing their bullish positions on the pound from 32,322 contracts to 38,403, but they were straight up bearish on the Swissy because they increased their Swissy shorts from 40,523 to 43,102.
  • Forex traders cut their yen shorts from 107,613 to 106,129 while simultaneously increasing their yen longs from 30,277 to 31,288, allowing the yen to take some ground from the Greenback.
  • The Loonie had the lowest net absolute change, but speculative forex traders actually slashed their bullish bets 0n the Loonie from 41,304 to 38,349. It just so happens that they also slashed their bearish bets from 79,921 to 77,329.

The small dent on demand for the Greenback after five consecutive weeks of ever-growing demand was probably due to the very disappointing reading for the Institute for Supply Management’s manufacturing PMI (48.6 vs. 50.6 expected, 50.1 previous ), which caused the Greenback to weaken across the board during the Dec. 1 U.S. forex session. Although Chicago Fed President Charles Evans’ rhetoric about favoring a later rate hike probably dampened demand for the Greenback as well.

Anyhow, the pause in demand for the Greenback allowed most of its forex rivals to take some ground, with the Aussie being the most successful of them all, probably because demand for the Aussie was being boosted by the fact that the RBA did not cut rates as expected, and even sounded somewhat upbeat in their Dec. 1 rate statement. Pip Diddy also noted that forex traders were loading up on the Aussie during the Nov. 30 Asian forex session due to a slightly higher-than-expected increase in Australian company profits (1.3% vs. 1.1% expected, -0.5% previous). Of course, this was before the rout in commodities, especially iron ores, began to weigh-in on demand for the Aussie.

Incidentally, Pip Diddy also mentioned that forex traders were loading up on the Kiwi as well due to the jump in ANZ’s business confidence index (14.6 vs. 10.5 previous), which was apparently one of the main drivers that allowed many Kiwi pairs to make it to the Top Forex Market Movers of the Week, and helps to explain why the net bullish bets on the Kiwi were able to edge up.

Moving on, net bearish bets on the euro continued to pile up. This was most likely due to continued speculation of more easing moves from the ECB. And given how the euro spiked across the board during the Dec. 3 London forex session when the ECB delivered on a rate cut (but failed to deliver on more QE), we’ll probably see a some euro shorts winding in next week’s CFTC COT forex positioning report.

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.