Latest CFTC Release Dated February 26, 2008:
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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 71, indicating that plenty more selling is possible. However, the 13 week index is at 0, which warns of a bearish sentiment extreme and potential turn. Conditions remain bearish but the USD is probably very close to a significant bottom. Watch for signs of strength.
Signal: Bearish but forming a bottom
EUR: Interestingly, positioning regarding the Euro does not mirror that of the USD. The 52 wek and 13 week indexes are at 10 and 42 and havbe just turned up from 0. This suggests that the Euro could continue to gain for weeks, but not necessarily against the dollar. Look for longs in the EUR / commodity crosses.
Signal: Bullish
GBP: Our interpretation of the British Pound data is similar to that of the Euro’s. The indexes are at 14 and 58 and have just turned up from bearish extremes (0), so caontinue to favor Pound strength.
Signal: Bullish
CHF: The 52 and 13 week COT indexes are at 86 and 75 and trending up. Favor CHF strength until a bullish sentiment extreme is reached (likely in the next few weeks).
Signal: Bullish
JPY: The 52 and 13 week COT indexes are at 78 and 33. Interestingly, speculative Yen longs fell significantly even though the Yen has been gaining. Expect at least a corrective decline in the Yen (USDJPY rally). The 13 week index reaching 0 will signal that it is safe to buy the Yen.
Signal: Bearish
CAD: The 52 and 13 week COT indexes are at 43 and 92. The 13 week index warns of a bullish extreme indicating that the CAD could decline significantly going forward.
Signal: Bearish
AUD: The 52 and 13 week COT indexes are at 45 and 83 and have rolled over (slope is now negative). We wrote last week that “bulls should be careful here because the 13 week index is close to 100, indicating that the bullish boat is beginning to get a bit too crowded.” The 52 week index suggests that the Aussie could continue gaining while the 13 week index is suggestive of a top. Until things clear up, we will calssify conditions as neutral.
Signal: Neutral
NZD: The 52 and 13 week COT indexes are at 53 and 75. The reading is the same as for the AUD. Bulls should be careful here because the 13 week index has turned over from 100, indicating that the bullish boat is beginning to get a bit too crowded.
Signal: Neutral
