Dollar bears reign supreme in the latest COT report
US Dollar Index:
Dollar bearishness vaulted higher on the week as
traders pared long dollar positions in the British pound and Swiss franc while
comparably increasing dollar strength in the euro currency. However, what sent
the shift further into negative territory looked to be a tripling of Australian
dollar long interest and a corresponding shift in the aforementioned Swissie
sentiment. Further commodity bloc currency interest could be seen in rising
Canadian dollar buying, rising by 21 percent. As a result, implied dollar
positioning remains negative, increasing from a short bias of 2,107 contracts to
an enormous 38,994 ratchet. U.S. dollar index open interest fell 2,218
contracts to 18,648 with the technicals showing near term retracement potential
after such a shift.
EUR:
Net positioning shifted in the euro zone currency
with traders paring back long interest by 24 percent to 29,321 contracts while
boosting short initiatives to 21,736 contracts, higher by 6,486. As a result,
net non-commercials totaled 7,585 long contracts, significantly lower than the
previous 23,518 in the week prior. With the long to short ratio now reduced to
a 1.3:1 figure, the recent switch is reflected most accurately as the underlying
spot declined over the five sessions prior to the release. Subsequently, at
this point, a short consolidation period looks to follow prior to any further
directional bias as the currency approaches key support. Open interest remains
healthy at 162,743 contracts, adding 1,725.
GBP:
Traders pared back short sterling positions,
incrementally adding to long interest, and increasing the long to short ratio in
the previous week. Short sterling interest declined to a mere 8,935 contracts,
slipping 40 percent from the 14,944 contracts in the prior release.Â
Subsequently, long initiatives grew to 27,410 contracts, pushing the long to
short figure to a little over 3 pound buys to 1 sell. This now increases the
net non-commercial total to 18,475 contracts, suggesting a potential bottom in
recent pessimism reflected in the underlying spot. As a result, with the
currency approaching a key support level, traders may be looking to capture a
bounce and remain in the current upward channel. Open interest grew to 91,701,
higher by 11,179.
CHF:
Traders pared back Swissie shorts by 53 percent
while subsequently leaving long sides slightly changed on the week. Short
interest declined from 40,709 contracts to 19,141 while boosting long
positioning at 4,175, bringing down the previously enormous 13:1 short to long
ratio to a mere 4.6:1. All things considered, the overall net non-commercial
figure plunges 60 percent to 14,966 contracts, however still remaining on the
short side. The sudden shift in sentiment looks to be reflected in the
underlying spot currency as price action rose higher after short consolidation
above the SFr.12600 figure last week. Additionally, with the strength of the
shift, traders could expect a near term reversal as the market becomes one
sided.
JPY:
Short sentiment grew incrementally in the
Japanese yen with short interest rising to 45,214 contracts while long side
interest increased lightly to 10,280 from a previous 9,358 contracts. Much like
the consolidation that we have witnessed recently in the underlying spot, net
non-commercial positioning remains little changed at 34,934 contracts, still to
the short side. Subsequently, the 4.35:1 short to long ratio remains little
changed confirming the rather staid environment as the currency remains in a
confined range with defined barriers at 109 and 111.50. However, any breakouts
of those respective levels could see some shift in net non-commercial
positioning. Open interest remains healthy at 189,247 contracts, higher by
22,709.
CAD:
Much like the Japanese yen, Canadian dollar
interest remained well contained with only incremental changes visibly witnessed
in the week ending September 13th. Rising slightly, long positioning rose to
45,957 contracts from the previous week’s 41,543 with sell side interest
decreasing to 16,365, down 635 contracts. The incremental rise was enough to
push higher net non-commercials to 29,592, as well as maintaining a strong 2.8
Canadian dollar longs for every 1 short. With oil prices still lofty and
further interest rate hike potential, the underlying remains testing the support
at C$1.1800. However, given the sustained interest a breakout looks to be
imminent as benchmark equity indexes domestically have been garnering increasing
attention.
AUD:
Similar to the Loonie, sustained interest in
commodity bloc currencies have underpinned long interest in the Aussie as buying
interest vaulted higher in the week, by almost two and a half times. Long
positioning rose to 36,285 contracts from as short sellers rose incrementally to
3,043 from the previous 2,791 contracts. As a result, net non-commercials
remains long and strong at 33,242 contracts as the long to short ratio ratchets
to an almost 12:1 figure. With this sudden shift, traders should be wary that a
near term retracement looks probable as the market has become one sided. Open
interest subsequently soared 60 percent, rising to 96,367 contracts.
Richard Lee
Richard Lee is a Currency Analyst at Forex
Capital Markets. Employing both fundamental models and technical analysis
applications, Richard contributes regularly to DailyFX, Yahoo Finance and Comtex.
Prior to joining the research team, Richard was one of the senior instructors
for the FX Power Course, teaching thousands of traders the basics of currency
trading, technical analysis and how to implement trading strategies. He has
extensive experience in trading the spot currency markets, options and futures.
Richard previously traded FX, equity and equity derivatives for four years as
well as work for a private equity consortium before joining FXCM.