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According to calculations done by Reuters, the value of net long positions on the Greenback jumped for the third consecutive week from the previous week’s $28.07 billion to $33.68 billion, which is the highest ever since mid-August. Moreover, the latest Commitments of Traders forex positioning report from the CFTC shows that the U.S. dollar was able to take some ground from ALL of its forex rivals, but the Greenback was still ultimately losing out to the Kiwi, though.

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 (Nov. 10, 2015)
CFTC COT Forex Positioning (Nov. 10, 2015)

Lemme break down the latest numbers for y’all:

  • The Greenback is winning out against almost all of its forex rivals, with the Kiwi being the last currency standing. Nevertheless, net long positions on the Kiwi took a hit due to the number of Kiwi shorts increasing to 15,703 from the previous week’s 14,648.
  • Non-commercial forex traders slashed their long positions on the Japanese yen from 41,489 contracts to just 35,081. At the same time, they also drastically increased the number of short contracts on the yen from 85,276 to 101,969. As a result, the Japanese yen had the largest net absolute change in positioning among all of the Greenback’s forex rivals.
  • The pound finally lost out to the Greenback due mainly to forex traders increasing their short positions on the pound from 45,587 contracts to 55,139 for the week ending on November 10. They also trimmed the number of bullish contracts on the pound from 45,775 to 39,369, which is why the pound printed the second largest net absolute change in positioning.
  • Large speculators also pumped up the number of short contracts on the Aussie from 88,481 to 98,723 while paring their longs from 49,856 to 45,893 contracts, allowing the Aussie to claim third place in terms of net change in positioning.

The third  jump in the value of net long positions on the U.S. dollar and the Greenback’s overall strength against its forex rivals were most likely due to continued speculation on a highly-anticipated December rate hike. If y’all recall, forex traders interpreted the U.S. Fed’s tone during the October 28 FOMC statement as being hawkish overall.

And post-FOMC rhetoric from Fed officials only served to keep speculation alive. U.S. Fed Chairperson Janet Yellen stated in her November 4 testimony before the House Committee, for example, that a December rate hike is a still a “live possibility” since the U.S. economy is “pretty strong and growing at a solid pace.”

What really pumped up demand for the Greenback, however, was the November 6 NFP report since it came in strong and reinforced the idea of a December rate hike. In terms of specifics, the jobless rate ticked lower to 5.1% from 5.0% as expected, but non-farm employment change saw a better-than-expected net increase of 271K jobs (179K expected, 137K previous), while wage growth printed a better-than-expected increase of 0.4% (0.2% expected, 0.0% previous).

The U.S. dollar’s forex rivals were naturally reeling from the Greenback’s overwhelming strength, but they were also suffering from inherent weakness, especially those currencies which saw the largest net change in positioning.

The Japanese economy, for instance, has been showing signs that it was gonna slip into yet another recession (and we now know that it did), which weighed heavily on the Japanese yen.

The pound, meanwhile, had to deal with a 0.2% month-on-month contraction (+0.9% previous) in industrial production for the September period and a slightly more dovish BOE. In their latest MPC meeting minutes, for example, BOE officials stated that “The path for Bank Rate implied by market yields, on which the MPC’s projections are conditioned, has fallen and now embodies an even more gradual pace of tightening than at the time of the previous Report.”

As for the Aussie, RBA officials were actually pretty upbeat in their most recent monetary statement and Australia even got a few positive economic indicators. However, the Aussie probably got slapped by poor Chinese data, namely Chinese imports declining by 16% in October, which is the 12th consecutive month of declines and bad news for Australia since most of Australia’s commodity exports finds their way to China.

China’s monthly CPI reading also dipped into the red during the October period, which also weighed-in on the Australian economy, and hence, the Aussie.

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.