Weekly CFTC COT Forex Positioning: Another Down Week for the Dollar

The value of net long positions on the Greenback for the week ending on February 2, 2016 was trimmed from $23.85 billion to $18.20 billion, which is its lowest level since October last year, according to calculations done by Reuters. Also, the latest Commitments of Traders forex positioning report from the CFTC revealed that speculators are less bearish on the euro and Loonie.

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 (Feb. 2, 2016)

CFTC COT Forex Positioning (Feb. 2, 2016)

Lemme break down the latest numbers for y’all:

  • Net bullish bets on the yen were trimmed from 50,026 to 37,245 as non-commercial long positions were reduced by 10,520 to 82,108. 
  • Speculators were less euro bearish, as net short positions fell from 127,215 to 87,073.
  • The Swissy is still in the red after being pushed into bearish territory last week, with net short positions increasing ever so slightly to 4,695.
  • Net bearish bets on the pound chalked up a small decline, as forex traders probably lightened up on their positions ahead of the BOE Super Thursday.
  • Large speculators are still bearish on the commodity currencies, although net short positions were reduced for both the Aussie and Loonie.
  • The Kiwi saw a rise in net bearish bets, which rose from 5,400 to 8,436.

Risk appetite popped its head back in the financial markets early last week, as investors felt more hopeful that the crude oil price bounce could gain traction. After all, headlines were chock full of updates on an OPEC special meeting to be held this month, possibly to discuss a reduction in production levels or to a least come up with a compromise.

Higher-yielding currencies also took advantage of dollar weakness after Fed officials doused hopes of a March rate hike. According to FOMC member Fischer, inflation could stay low for much longer and that the U.S. central bank might slow down their tightening cycle due to global market volatility. Later on, Fed official Dudley even pointed out that the recent dollar appreciation could wind up hurting the economy.

However, as Pip Diddy mentioned in his roundup of Top Forex Market Movers, the commodity rally eventually fizzled around the middle of the week even after Russia showed willingness to participate in these talks. Downbeat data from New Zealand even pushed the Kiwi much lower against its forex rivals and risk aversion came back with a vengeance, allowing the Greenback to recoup some of its recent losses ahead of the NFP release.

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.