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According to calculations done by Reuters, large players raised the value of net short positions on the U.S. dollar from $13.19 billion to $17.36 billion during the week ending on September 26, which is the highest since September 2012.

And the latest Commitments of Traders (COT) forex positioning report from the CFTC shows that the Greenback’s losses were broad-based. However, it’s worth pointing out that the pound was able to take enough ground from the Greenback that net positioning on the pound finally became net bullish again for the first time since October 2015.

Oh, please keep in mind that the numbers below show the net positioning of non-commercial forex traders against the U.S. dollar.

And 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.

And here is how positioning activity played out during the week ending on September 26, 2017.

The Greenback’s losses were broad-based since it lost ground to everything except the Swissy and the yen.

Interestingly enough, the week ending on September 26 covers the latest FOMC statement. And we know that the market saw it as hawkish because dollar spot, futures, and even U.S. bond yields jumped as a reaction to the unexpected revelation that the Fed is still on track for one more rate hike before the year ends. And, more importantly, the majority of Fed officials were still willing to vote for another hike.

However, Fed Chair Yellen did say in her September 26 speech  that:

“In my view, it strengthens the case for a gradual pace of adjustments. Moving too quickly risks overadjusting policy to head off projected developments that may not come to pass. A gradual approach is particularly appropriate in light of subdued inflation and a low neutral real interest rate, which imply that the FOMC will have only limited scope to cut the federal funds rate should the economy be hit with an adverse shock.”

And this call for more gradual rate hikes may have convinced some Greenback bulls to take some profits off the table.

Anyhow, here are the major events, reports, and other catalysts for the other currencies:

EUR

Sentiment on the euro improved. But a closer look at positioning activity shows that euro bulls and euro bears were actually unwinding their positions. However, the slashing of 31,760 shorts contracts on the euro easily overshadowed the loss of 6,346 long contracts on the euro, which is why net bullish positioning on the euro increased.

Positioning activity likely reflects profit-taking by euro bears and some euro bulls deciding to call it quits after euro spot and futures tanked in the wake of news that Angela Merkel’s CDU/CSU was unable to secure a majority of seats during the German elections.

GBP

Positioning activity on the pound was rather bullish since pound bulls added to their positions while pound shorts trimmed theirs. Moreover, the bullish positioning activity was enough to finally push net positioning on the pound into positive territory for the first time since October 2015.

Positioning activity likely reflects how large players reacted to the U.K.’s August retail sales report since it printed a 1.0% month-on-month jump, which is the strongest reading in four months and is much better than the +0.2% consensus.

Other than that, positioning activity also likely shows how large players positioned themselves before and after Theresa May’s Brexit speech since that reinforced the idea for smoother Brexit negotiations and a “softer” Brexit, although May’s speech didn’t really offer much in terms of details.

Even so, E.U.’s Barnier responded to May’s speech by saying that “Theresa May has expressed a constructive spirit which is also the spirit of the European Union.” And large players likely priced that in as well.

Interestingly enough, Moody’s announced during this period that it decided to downgrade the U.K.’s credit rating from Aa2 to Aa1 and its outlook from “stable” to “negative”. However, that didn’t seem to have a significant impact on positioning activity.

But then again, the increase in pound longs was much smaller compared to the decrease in pound shorts, which may imply that demand for the pound was dampened by the Moody’s downgraded.

JPY

After two weeks of pushing back against the Greenback, the yen finally took a step back, thanks to the influx of 20,553 short contracts on the yen.

The massive influx of yen shorts likely reflects the growing monetary policy divergence between the Fed and the BOJ since the BOJ decided to maintain its current monetary while maintaining its easing bias.

Aside from that, the influx of yen shorts likely reflects the increased political uncertainty in Japan after Japanese PM Shinzo Abe’s called for a snap election.

CHF

As usual, positioning activity on the Swissy was very minimal. But a closer look at positioning shows that both Swissy bulls and Swissy bears were adding to their positions.

The increase in Swissy longs was likely due to the risk aversion caused by fresh news related to North Korea at the time. As for the decrease in Swissy shorts, that likely reflects the growing monetary policy divergence between the Fed and the SNB because the SNB has been expressing that it has no plans to exit its negative interest rates any time soon.

AUD

Sentiment on the Aussie continues to improve. Like in the previous week, however, positioning activity shows that net bullish bias on the Aussie increased mainly because Aussie shorts trimmed their positions again.

Anyhow, the reduction in euro shorts likely reflects profit-taking by shorts after the Aussie slid lower when RBA Governor Lowe said during the Q&A portion of his speech that “More likely it [RBA’s cash rate] will go up but it’s not for some time.

Incidentally, it’s also likely that the small increase in Aussie longs was due to Lowe’s statement above since it does show that the RBA has a hiking bias. It just so happens that the RBA doesn’t think it’s time to start hiking.

NZD

After seven consecutive weeks of getting pushed back by the Greenback, sentiment on the Kiwi finally improved as Kiwi shorts pared their positions, although Kiwi bulls slightly trimmed theirs as well.

The reduction in Kiwi shorts likely shows profit-taking after because of the political limbo in New Zealand in the wake of the 2017 general election, wherein National got the most votes but failed to capture enough seats for a majority government.

The reduction in Kiwi longs, meanwhile, likely shows some Kiwi bulls getting spooked, also because of the results of the New Zealand election.

CAD

Positioning on the Loonie was rather bullish because Loonie longs added to their positions while Loonie bears significantly reduced theirs.

The rather bullish positioning on the Loonie likely reflects higher rate hike expectations after Canada’s August CPI report showed that two of the BOC’s three preferred measures for underlying inflation showed further improvements ahead of BOC Governor Poloz’s speech.

However, we now know that Poloz disappointed the rate hike junkies when he said during his speech that “there is no predetermined path for interest rates from here. Monetary policy will be particularly data dependent in these circumstances and, as always, we could still be surprised in either direction.”

Do note, however, that the most recent COT report does not yet reflect how large players reacted to Poloz’s speech.

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.