Weekly CFTC COT Forex Positioning: Dollar Bulls Still Charging!

The value of net long bets on the the Greenback climbed for the third week in a row from a two-month high of $10.52 billion to $14.72 billion, according to calculations done by Reuters. This weekly rise of $4.2 billion brings net long dollar positions up to its highest level since February.

Keep in mind that the numbers below show the net positioning of non-commercial forex 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 (Oct 11, 2016)

CFTC COT Forex Positioning (Oct 11, 2016)

Lemme break down the latest numbers for y’all:

  • More significant gains in net long USD positions were seen in the week ending October 11, 2016 compared to the previous week.
  • Quite notably, dollar bets against the euro and the yen saw the largest changes.
  • Net short positioning on the pound retreated to 95,470 after reaching a record high of 97,752 the other week.
  • The euro saw a slight pickup in long bets once more but this was outweighed by a jump in short positioning to 207,756 contracts.
  • The Swissy was also treated to a fresh round of bearish bets, rising from 22,229 to 29,554 to overshadow the small bump up in long positioning.
  • Both non-commercial long and short positioning on the Kiwi were reduced for the week, as traders likely held out for this week’s quarterly CPI release. Long and short bets for the Loonie were reduced as well.
  • Bullish bets on the Aussie barely changed while bearish bets were reduced from 49,607 to 47,291.

Dollar demand remained afloat for the week ending October 11, 2016 even though the September NFP reading came in short of consensus with 156K in hiring gains. While the Greenback initially had a bearish reaction to the report, the scrilla was able to make a comeback in the succeeding days, owing partly to a decent pickup in labor force participation and higher average hourly earnings.

To top it off, mostly hawkish speeches from Fed officials after the jobs numbers were printed seemed enough to reassure dollar bulls that rate hike expectations are still in play, if not for November then maybe for December. This may have also factored into the continued weakness in the Japanese yen, as traders jumped to the safe-haven dollar boat instead.

Meanwhile, the euro was forced to retreat when market participants realized that there wasn’t much truth to the rumors that the ECB was considering trimming its asset purchases. Head honcho Draghi even made it a point to reiterate that there wasn’t any discussion regarding tapering just yet, causing the shared currency to resume its slump.

After it’s flash crash the previous week, the pound was able to put up a good fight when U.K. Prime Minister Theresa May conceded that the government’s game plan for Brexit negotiations can be “properly scrutinized” by the folks over in parliament, getting hopes up for a “soft Brexit” scenario.

Lastly, the reductions Loonie positioning were likely due to traders playing it safe ahead of the informal OPEC meeting in Istanbul and the release of Canada’s jobs figures. Bearish Aussie bets were trimmed likely due to the relatively neutral RBA statement, along with stronger than expected retail sales and trade balance from the Land Down Under.

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.