The latest Commitments of Traders forex positioning report from the CFTC reveals that the U.S. dollar is still grinding higher, with large speculators increasing their net bullish bets to $25.76 billion from $25.11 billion the week before.
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.
Lemme break down the latest numbers for y’all:
- Non-commercial traders have shifted their sentiment on the pound, increasing their net bearish bias after 3 consecutive weeks of declining bearish sentiment
- The yen saw its second consecutive week of declining net bearish bias, having the largest absolute change in short positioning
- Large speculators decided to ramp up their net short positions on the Aussie and the Loonie; not so much on the Kiwi
- Traders slightly trimmed their long positions on the Swiss franc for the second consecutive week but remained bullish overall
- The euro actually saw a slight decrease in net bearish bias
The euro started the week rather weak (Fun with puns!), thanks to the “no” vote during the Greek referendum but quickly gained some buyers as hope for a deal began to emerge.
But before Greece’s revised proposal was leaked later on in the week, the prevailing sentiment was risk aversion, which explains why traders were fleeing to the safe-haven currencies such as the yen and the Greenback. Forex traders were fleeing to the Swiss franc too, but there were a couple of days where the Swiss franc was the weakest currency of them all, thanks to intervention from the Swiss National Bank.
Risk aversion also stifled demand for the high-yielding comdolls, although each comdoll had their own particular problems too, just like last week: The Kiwi saw the NZIER business confidence shrink from 23 to 5; Canada’s Ivey PMI tanked (55.9 actual, 62.3 previous) and its trade deficit widened to -3.3B boot; Australia saw iron ore prices decline by 10% to $44.59 per dry metric ton and several forex traders seem to have viewed the most recent RBA statement in a pessimistic light.
As for the pound, it found a lot of sellers starting on Tuesday (July 7) due to a very dismal reading for its manufacturing production (-0.6% actual, -0.4% previous). As pointed out by Forex Gump, manufacturing is a significant sub-component of GDP growth so a second consecutive decline in manufacturing production probably led to speculation that future GDP readings would become stagnant or even show a contraction.
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.