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The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over the last 52 weeks. A reading close to 0 suggests that a bottom is forming and a reading close to 100 suggests that a top is forming. The readings are for the actual currency, not the currency pair. For example, a reading of 100 on the Canadian Dollar suggests that the Canadian Dollar is close to a top (USDCAD close to a bottom).
Readings of 95 and higher as well as 5 and lower are in boldfaced red type to indicate potential market extremes. The last 4 weeks of the COT Index are shown because it is just as important to know where the index is coming from. For example, an increasing index is bullish until the index is extreme (near 100), at which time the risk of a reversal or pause in the trend increases.
US Dollar Index: The 52 week COT index is at 82, indicating that plenty more selling is possible. However, the 13 week index has bounced from 0 to 83 over the last month, which introduces the possibility that sentiment towards the USD has turned from a bearish extreme and that the USD will rally further from its low. The composite COT is increasing too, which is USD bullish.
Implications: Bullish
EUR: The 52 and 13 week indexes are at 6 and 25. Similar to the USD (but inverse) the 52 week index suggests that the larger bullish trend will eventually continue. However, the 13 week index has rolled over and fallen to 25. The composite COT is declining (not a surprise since the USD composite COT is increasing), which favors Euro weakness over the next few weeks.
Implications: Bearish
GBP: The 52 and 13 week indexes are low, at 0 and 0. This, combined with the fact that the decline from 2.0396 is choppy, favors the idea that the GBP is forming some sort of a low. How significant this low ends up being remains to be seen of course.
Implications: Bullish
CHF: The readings are at 69 and 42 for the 52 and 13 week indexes. Neither index indicates potential for a bullish or bearish extreme, therefore implications are neither bullish or bearish.
Implications: Neutral
JPY: The 52 and 13 week COT indexes are at 82 and 25 after rolling over from extreme levels. This favors a continued correction in the Yen (rising Yen crosses) for a few more weeks.
Implications: Bearish
CAD: The 52 and 13 week COT indexes are at 4 and 17. Readings this low warn of a bearish sentiment extreme. As such, the CAD is expected to outperform over the next few weeks.
Implications: Bullish
AUD: The 52 and 13 week COT indexes are at 63 and 83. The 13 week index was at 100 two weeks ago, which warns of a bullish extreme. Often times, the uptrend will continue for a few weeks before the reversal in price occurs following an extreme reading. In other words, watch for a top.
Implications: Bullish but forming a top
NZD: The 52 and 13 week COT indexes are at 4 and 0 after being at 8 and 0. Similar to the CAD and GBP, readings this low are suggestive of a bearish sentiment extreme.
Implications: Bullish
