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After three weeks of increases, the value of net long bets on the Greenback was slashed dramatically from $11.30 billion to $2.72 billion during the week ending on June 14, 2016, according to calculations done by Reuters. And the latest Commitments of Traders forex positioning report from the CFTC shows that the Greenback was pushed backed by most of its forex rivals.

Keep in mind that the numbers below show the net positioning of non-commercial forex 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 (June 14, 2016)
CFTC COT Forex Positioning (June 14, 2016)

Lemme break down the latest numbers for y’all:

  • Compared to the previous week’s net positioning, the Greenback was pushed back by most of its forex rivals, except the Kiwi and the Loonie.
  • Net bearish bets on the pound was substantially reduced, but a closer look at how positioning went down shows that pound bears only trimmed their shorts from 102,636 contracts to 98,367, while pound longs drastically ramped up their positions from 36,337 contracts to 61,706.
  • Net positioning on the Swissy turned bullish after dipping into the red previously, thanks mostly to Swissy shorts paring their positions from 31,289 contracts to 21,362.
  • Non-commercial forex traders increased their net bullish bias on the yen by mainly by pumping up their longs bets from 68,237 contracts to 77,703.
  • After 13 consecutive weeks of defiance against the Greenback, the Kiwi was finally pushed into net bearish territory, due primarily to long bets in the Kiwi getting slashed from 38,562 contracts to 29,558.
  • Net bearish bias on the euro was reduced mainly because euro bulls decided to increase their long bets from 93,492 contracts to 104,510.
  • Large speculators reduced their net bearish bets on the Aussie by trimming their shorts from 51,214 contracts to 46,290 while simultaneously increasing their longs from 35,406 contracts to 39,512.
  • Net positioning on the Loonie only showed a moderate decrease in net bullish bets, but a closer look at positioning activity shows that both Loonie longs and Loonie shorts were adding to their positions, and it just so happens that more shorts were added than longs.

After three straight weeks of increases, net long bets on the Greenback got sharply cut down. And this drastic reduction was very likely due to profit-taking and/or preemptive positioning ahead of the June 15 FOMC statement, given that the May NFP report was a severe disappointment. True, U.S. Fed Chairperson Janet Yellen tried to play off the dismal NFP report in her June 6 speech, but most of the other Fed officials didn’t really express their opinion on the NFP report, which likely caused uncertainty, as well as fueling speculation that the other Fed officials may be more dovish.

And of course, we now know that the FOMC statement was a bit dovish overall, with all FOMC members now voting to keep rates steady, as well as a slower path to tightening in 2017 and 2018. Rate hike expectations for 2016 were relatively unchanged, though, so we’re still looking at one or two rate hikes within the year.

As for the other currencies, the reduction in bearish bias on the pound due to a substantial increase in long bets was likely because of preemptive positioning ahead of the June 15 U.K. jobs report, with the expectation that a positive jobs report may make BOE officials more upbeat during the June 16 MPC monetary policy decision.

This is corroborated by the pound’s broad-based rise in the runup to and in the wake of the U.K. jobs report, as pointed out by Pip Diddy in his latest Top Forex Market Movers of the Week.

Next, the paring of Swissy shorts was most likely because large speculators were unwinding their positions ahead of the SNB’s June 16 monetary policy assessment, as well as the prevalence of risk aversion at the time, which caused the Swissy to appreciate due to safe-haven demand.

Speaking of the prevalence of risk aversion, that’s likely the reason why long bets on the safe-haven yen increased. Although we can’t rule out the possibility that forex traders were opening preemptive positions ahead of the June 16 BOJ monetary policy decision in the expectations that the BOJ will maintain its monetary policy despite calls for more easing, which is exactly what the BOJ did.

The prevalence of risk aversion also likely weighed down on the Kiwi and the Loonie, which are both higher-yielding comdolls. Although sliding oil prices was likely a factor as well in the Loonie’s case.

As for positioning activity on the Aussie, it’s kinda weird since the prevalence of risk aversion should have convinced speculators to become more bearish on the Aussie, which is also a higher-yielding comdoll. Anyhow, the increase in long bets on the Aussie was likely due to speculation that the Aussie would do better against the Greenback if the FOMC statement is dovish. The decrease in short bets, meanwhile, was possibly due to Aussie shorts taking profits off the table.

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.