Latest CFTC Release Dated August 22nd, 2006:
Positioning Indicates That AUD/USD May Have Topped Out
Traders Double CAD Longs
US Dollar Index: Implied positioning remained net short (and has been since 4/18). Implied short positioning did decrease this week. Implied short positions topped out on May 30th, when the USD index bottomed out just below 84.00. This means that the trend has been towards USD buying suggesting that a low may be in place (Mays low). Additionally, commercial buying was the most it had been in 52 weeks at the beginning of June. Commercials are often correct at market turns. This is more evidence that a bottom may be in place.
EUR: Speculators cut longs for the second week in a row but remain extremely long when compared to the last 52 weeks which continues to favor a topping scenario for EURUSD. Commercial buying remains low (9th percentile when measured against the last 52 weeks), which also does not bode well for bulls.
GBP: Long speculative GBP positioning decreased for the time in 8 weeks. Still, speculative positioning is extreme (to the long side) when compared to the last 52 weeks. Remember, extreme positioning often marks turning points in the market. The interpretation is the same as it is for the euro. That is, the extreme positioning favors a topping out in GBP over coming weeks.
CHF: CHF speculators decreased short positions for the first time in 3 weeks. There is little to gather from the data though since speculators positioning is not extreme.
JPY: Speculators increased short Yen positions for the third week in row. The difference between speculative and commercial positioning is now extreme (98th percentile when measured against the last 52 weeks). Commercial buying has picked up as well. The commercial index has gone from 48 to 74 in 3 weeks (a reading of 100 means that commercials are the longest they have been in 52 weeks and a reading of 0 means that commercials own the smallest amount of the commodity when compared against the last 52 weeks). This bodes well for JPY bulls. Increased commercial demand precedes turning points. As such, look for a bottoming out in Yen (a topping out in Yen pairs) over the next few weeks.
CAD: Specs nearly doubled their long positions. This is in line with a strengthening CAD (weakening USDCAD). The trend right now is towards CAD buying. There is little else to gather from the data though since speculators positioning is not extreme.
AUD: Speculators cut AUD longs a significant amount and open interest fell significantly as well indicating that a top may be in place. We have focused on the extreme long positioning and the lack of commercial demand in recent weeks, which favors a reversal to the downside.
