Speculators Reduce USD Short Positions

[cashbackforex]

CFTC Commitments of Traders (COT) Report, published 22 January 2013 - Technical Analysis. The latest COT report shows that the aggregate spec short position in the USD was reduced to 175K, down from 200k in the previous week. The reduction of the short USD position was made in the pound, Canadian USD, and the Swiss franc. To a degree, this was offset by an increase in the long euro short USD positions.

Commodity currencies remain popular longs versus the USD though the position was reduced by about 4.3K contracts. The reduction came in the Canadian Dollar and increases came in the NZ and A$s. The total commodity currency long is now down slightly, to 233.8K.

There were no position changes during the week as most specs held their longs and shorts. If we do observe changes, they are relatively minor.

US Dollar Index: There was a slight pick-up in the long position of specs in this small market. In this report, the spec long is 9.6K up from 8.7K. While the small spec is a 2 ratio long, this is a market dominated by the large specs, and their long is of a modest scale.

Euro (EUR/USD): The large spec increased their bet that the euro will appreciate against the USD. Only last week, the specs flipped to the long side of the euro, and while the large specs added to their positions, the small specs reduced theirs. Spreading is over 10.2% of the entire market, indicative of active option trade. Market action has favored the longs in the euro.

British Pound Sterling (GBP/USD): From a high of about 1.6150 three weeks ago, the pound has been a steady sell-off, and we are currently trading about 1.5730. The sell-off started when the specs were loaded up long, and the surprising thing is they remain long, although in reduced numbers, down to 24.4K contracts.

Japanese Yen (JPY/USD): The yen's popularity with traders has increased, and the total open interest is 255K, almost as big as the euro where the OI is 261K. The sell-off in the yen has brought out the bears. The combined speculative position in the yen is 108K, about the same as last week. Both size specs are about 3 ratio shorts. Spreading is a very substantial 11.9% of the market. The market action has rewarded the shorts.

Swiss Franc (CHF/USD): The recent strength in the euro has put pressure on the SF longs who were short the euro as well as the USD. The total long in the SF by specs was reduced from 21.5K in the prior week to 11.8K this week. Since the OI was down 3.5K, this implies spec liquidation.

Canadian Dollar (CAD/USD): Despite the poor performance of the C$, it remains extremely popular with the large specs who are long by a 7.8-to-one ratio. The total spec position was reduced by about 1k, but it remains long almost 88K contracts.

New Zealand Dollar (NZD/USD): Specs continue to buy and hold the Kiwi. Large specs are a 5.5 ratio long and the small specs are a 2.8 ratio long. There was a small increase in the total spec long to almost 27K contracts.

Australian Dollar (AUD/USD): The OI in the A$ grew to almost 221K as the specs continued to buy this commodity currency. Since the cut-off date for this report, there has been some pressure on the A$, and this has continued today. The total spec long was up to almost 119K. Large specs were approaching a 3 ratio long and the small specs a 2-to-1 long. A reason for the market to liquidate might take this market lower than you might expect.

The COT Report reflects a condensed version of currency traders collective market votes as derived from the U.S. Commodity Futures Trading Commission’s weekly data output. Any opinions, news, research, analyses, prices, or other information contained in this discussion post are provided as general market commentary, and do not constitute investment advice from CashBackForex and/or CashBackForexUSA

 

[NVP]

Can i ask why commercial positions are so opposite to large traders ?

is that the 2 sides taking one anothers trade ?

N

 

[Itshamish]

Can i ask why commercial positions are so opposite to large traders ?

is that the 2 sides taking one anothers trade ?

N

Commercials are both producers on one hand an suppliers on the other. Their interest is equal and opposite and activity is esigne for protecting their trade and balance sheet.They operate through the banks. On the other side are the speculators - they make their dosh by betting on the direction of the flow. Large speculators are hedge funds in the main, but also banks... and NVP

Small speculators - that's me. I am always wrong at the turn of the market - Commercials always right (they have the resources).

In the past, the CoT Report was very significant because it was designed to protect the market participants by fair price discovery. Nevertheless it was not transparent as the reports were published in arrears.

CashbackForex provide the beat analysis and very helpful indeed when it comes to asking questions - but the whole subject is rather arcane and is really for the longer view.

With the volume of transactions,the increasing value of turnover and the visibility of price action by the second thanks to the 'Net and brokers' platforms one is really back to... interpreting Price Action.
Some may like to analyze Order Flow, someprefer to look at Sentiment (neurology et al).

But the best method, also complying with the KISS principle is, in MVHO, NVP's Strength-meter method combined with Basket Trading if you want to take things a bit further.

Just my two cents worth and thank-you for inviting me to comment.

Trade canny,

Hamish.

 

[cashbackforex]

Can i ask why commercial positions are so opposite to large traders ?

is that the 2 sides taking one anothers trade ?

N

Yes, we do need someone to take the other side of all trades. This can be spec action off-setting spec action, one spec buys and one spec sells, but it is more likely that the commercial will take the other side of the specs trades.

Often, speculators, however, run together and they can run the markets higher than the physical markets. Commercials then enter the market and take the other side of the spec future positions. As dealers in the physical markets, commercials connect the cash markets to the enthusiasm or despair of the specs.

All good fun, then!