CashBackForex Market & Technical Analysis - page 3
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Speculators Reduce USD Short Positions
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
Is the Yen Still a Sale?
Forex traders who correctly anticipated the yen was going to fall against other currencies have had a good month. At the beginning of January, the USD/JPY was trading just under 87¥ to the USD. By the end of the month it had slid to over 91¥ to the USD.
Even more impressive was the strength of the Euro compared to the yen, as the euro gained from about 114.50 to over 1.2350. For those carry traders seeking a cheap funding currency to buy notes in higher yielding countries, borrowing the yen and buying notes in Australia and New Zealand also has been a winner.
As we have pointed out, the weekly COT reports have consistently shown the speculators short over 100K contracts of the yen, although this position has been reduced from over 140K contracts in early December. This has been a lucrative trade for the specs and may be a big reason why forex trade has increased.
Credit the new Prime Minister Abe for the shake-up. For decades, the Japanese economy has been slowing, with deflation a hindrance. The goal of the Abe administration is 2% inflation a year.
The Abe plans seem timely and perhaps favored by the people. Wednesday, an opinion was expressed in the Asian Times, Japan Beats Chest in Midlife Crisis:
"... The median age in Japan is currently 45 years old. By 2030, the average person in Japan will be in their 50s, and it appears that most of the population is experiencing a nation's midlife crisis already. For the past decade or so, Japan has increasingly longed to remember a time of great economic and military success."
The multi-faceted approach to the moribund Japanese economy seems to have gained traction in Japan. The attached charts show the USD/JPY and the NZD/JPY appreciating against the yen. Likewise does the AUD/JPY, though we would not want to buy the Aussie until after the Reserve Bank next week on the 5th.
We have strong trending markets, for good reasons. Many of us have taken profits too quickly. Remember, real strong markets will not give you a break to buy. In this case, the buying opportunity may be when the market stalls and goes sideways, and then gets energy for another run to the upside.
If you do try to get into this one, give yourself a little room with the stop, and perhaps to work with less leverage.
Any opinions, news, research, analyses, prices, or other information contained in this post are provided as general market commentary, and do not constitute investment advice from CashBackForex and/or CashBackForexUSA
Speculators Heavy USD Buyers
CFTC Commitments of Traders (COT) Report 05 November 2013, published 08 October 2013, Technical Analysis. For the first time in nine weeks, spec long positions in the USD has increased. The total USD long is now up to 93,646 contracts, compared to only 12,746 contracts last week. Shorts reduced their short position in the Euro and the SF. The biggest reduction in short positions was in both the euro, and the SF.
There was an increase in the DI long, up to 10.8K contracts, the Japanese interest short, back up above 100K again.
There was selling of both the Canadian and the Australian Dollar, as the commodity currencies lose their appeal.