The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over a specific number of weeks (either 52 or 13). 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. 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
US Dollar Index: The 13 week index has rolled over from 100, which is bearish. A dollar bottom should form once the index is close to or at 0.
Implications: bearish
Euro
EUR: Speculators are net short and commercials net long. However, the 13 week index has increased from 0. This is bullish for the euro.
Implications: bullish
British Pound
GBP: The 13 week index has dropped significantly over the past few weeks. The closer the index is to 0, the more bullish conditions are for the GBP.
Implications: neutral
Australian Dollar
AUD: The 13 week index is at 92. Tops occur when the index is at or close to 100, so the probability of a top forming in the next few weeks has increased.
Implications: neutral
New Zealand Dollar
NZD: The 13 week index has increased from 0. This is bullish. Favor the upside until Conditions are bullish until the index reaches 100.
Implications: bullish
Japanese Yen
JPY: The 13 week index is at 0. This indicates that commercials are the longest they have been in 13 weeks and speculators the shortest they have been in 13 weeks. This is bullish for the Yen.
Implications: bullish (bearish USDJPY)
Canadian Dollar
CAD: The 13 week index is at 0. This indicates that commercials are the longest they have been in 13 weeks and speculators the shortest they have been in 13 weeks. This is bullish for CAD.
Implications: bullish (bearish USDCAD)
Swiss Franc
CHF: The 13 week index has increased from 8, indicating that a pessimistic extreme towards CHF may have been reached.
Implications: bullish (bearish USDCHF)
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.
Contact at [email protected]
