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According to calculations done by Reuters,  the value of net long positions on the U.S. dollar fell by $4.93 billion to $32.26 billion after six weeks of nonstop gains. The latest Commitments of Traders forex positioning report from the CFTC confirms this since it reveals that most of the U.S. dollar’s forex rivals were able to chip away at the Greenback’s dominant position.

Keep in mind that these numbers show the net positioning the 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 (August 25, 2015)
CFTC COT Forex Positioning (August 18, 2015)

Lemme break down the latest numbers for y’all:

  • The U.S. dollar is still winning out against all of its forex rivals, but it only managed to advance against the Swiss franc while losing ground to all the other currencies.
  • The Swiss franc saw further increases in net bearish bets for the third consecutive week.
  • Speculators finally pared their net bearish positions on the Japanese yen after four consecutive weeks of dumping it in favor of the U.S. dollar.
  • Non-commercial forex traders drastically trimmed their net short positions on the euro.
  • Pound bulls are back with a vengeance, threatening the Greenback’s domination in the process.
  • Forex traders slightly reduced their net bearish bias on all the comdolls, with the Aussie seeing the largest reduction.

Demand for the Greenback was probably dampened a bit because the yuan devaluation made forex traders doubtful of a September rate hike. In addition, economists were forecasting that headline CPI will tick lower to 0.2% from 0.3%, which was another reason to doubt a September rate hike. Furthermore, there were rumors that Chinese state-owned banks were selling the U.S. dollar in an attempt to limit the yuan’s devaluation, which is certainly possible since the PBOC later tried to assure the market that further yuan devaluation was not needed.

Most currencies quickly took advantage of the broad dollar weakness, but the Swissy probably remained soft against the U.S. dollar because of disappointing economic data from Switzerland such as PPI declining by 0.3% (-0.1% previous) and Swiss retail sales volume contracting by 0.9% in June (-1.8% previous). Of course, there’s also the possibility that the SNB was sneakily following its mandate to weaken the Swiss franc again.

Aside from broad dollar weakness, demand for the euro was spurred by positive developments in the Greek drama. Specifically, forex traders jumped on the euro after news came out that  Greece was finally able to secure a bailout deal with its creditors. And even more forex traders began loading up on the euro after the Greek parliament approved the bailout deal. Even a few euro bears were convinced to join the bullish side when it became apparent that Germany would say “yes” to a Greek bailout.

The pound took advantage of broad dollar weakness too, but forex traders really began to buy it up after July’s headline CPI reading ticked higher to 0.1% after posting a 0.0% back in June.

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.