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The value of net long positions on the Greenback jumped for the fourth consecutive week to $41.64 billion from $33.68 billion previously, according to calculations done by Reuters.  This is apparently the highest ever since late-March. In addition, the latest Commitments of Traders forex positioning report from the CFTC shows that all of the Greenback’s forex rivals were in retreat, but demand for the Kiwi remained surprisingly resolute nevertheless.

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. 17, 2015)
CFTC COT Forex Positioning (Nov. 17, 2015)

Lemme break down the latest numbers for y’all:

  • The Greenback is still winning out against almost all of its forex rivals other than the Kiwi. Speaking of the Kiwi, it’s still defying the Greenback’s domination. Heck, all that demand for the Greenback and yet the net long positions on the Kiwi only suffered a small dent.
  • Other comdolls weren’t so lucky. The Aussie printed the second largest net absolute change in  positioning of 13,635 due to the number of short contracts on the Aussie increasing from 98,723 to 111,397. The Loonie, meanwhile, finally saw an influx of sellers after several weeks of resistance, with the number of short positions on the Loonie increasing from 63,694 to 73,941.
  • The euro had the largest net absolute change in positioning due to large speculators drastically increasing the number of short positions they have on the euro from 221,933 contracts to 243,075.
  • The pound sank deeper into the red after finally losing out to the Greenback last week. This was due to forex traders trimming their long positions on the pound from 39,369 to 35,107 while pumping up their short positions from 55,139 to 60,367.
  • Non-commercial forex trades also opted to increase their net short positions on the yen and the Swissy. The yen, in particular, had the third largest net absolute change in positioning.

Greenback bulls were steamrolling everything in their path (except for the Kiwi, of course). The Greenback’s fourth consecutive week of overpowering strength against its forex rivals was most likely due to a string of positive data which complemented the November 6 NFP report and helps to justify a highly-anticipated December rate hike, as hinted at by the hawkish October 28 FOMC statement.

The headline (0.1% vs. 0.3% expected, 0.0% previous) and core (0.2% vs. 0.4% expected, -0.4% previous) readings for retail sales in October, for example, were able to print an improvement over their respective previous readings, even though they failed to meet the market’s expectations. The headline (0.2% as expected vs. -0.2% previous) and core (0.2% as expected, same as previous)  CPI readings for the October period, meanwhile, were reporting increases that were within expectations.

Of course, it’s also entirely possible that the build-up in bullish positions on the Greenback for the week ending on November 17 could have been due to speculation ahead of the FOMC minutes, which were released the following day.

Continuing demand for the Greenback naturally meant that demand for its forex rivals were getting drowned by sellers, but one forex rival defiantly refused to sink – the Kiwi.

Demand for the Kiwi was probably being driven by a better-than-expected increase in New Zealand’s quarterly retail sales (1.6% vs. 1.0% expected, 0.1% previous) as well as the somewhat upbeat rhetoric and lack of Kiwi jawboning from the RBNZ in their latest Financial Stability Report.

It’s also possible that the prevalence of risk appetite was pumping up demand for the higher-yielding Kiwi at the time. Interestingly enough, however, the Kiwi’s forex price action against the Greenback during the week ending on November 17 was actually one of weakness. And it wasn’t until after the FOMC minutes came out on November 18 that the Kiwi (and especially the Aussie) was able to give the greenback the boot.

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.