COT Report 03 30 2010

To Subscribe to alerts when a new COT report is published (weekly) click here and choose "subscribe" on the weekly COT alerts field, and click to update your existing account or register a new one.

Data and Analysis for Most Recent Release

Legend:	Net Long	Net Short	Position Change

Overview: The open interest (OI)climbed 67,434 contracts during the period with the biggest increase in the euro, 41,317 contracts, and the yen 17,687 contracts.  The net specs position in the USD was about even last week, but there was a movement of 77,203 to a long USD.  Specs who are short a currency are by default long the dollar.  The biggest increase in a long USD was by selling of the yen, over 51,000 contracts during the period. Specs also added to their short euro long USD positions.  The small specs biggest long positions were in the SF 34.8% and the C$ 28.8%.  The small specs largest short positions were in the SF 33.8% and the yen 32.8%.  Perhaps the growth in the short yen may partially reflect cross trades shorting the yen.  The biggest large spec long positions remain in the NZ$ 76.1% and the DI, 74.3%, though the specs have big positions in the C$ and the A$ with 54.3% and 54.3% respectively.  Largest short positions by the big specs are in the pound, 52.8% and the SF, 43.5%.  The SF market is a small and very fluid market with positions shifting quickly.

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	61,950	46,012	10,724	5,819	1,644	7,300	46,764
	Change:	9,146	7,643	4,624	541	-676	979	5,215
	% Open Interest:		74.3	17.3	9.4	2.7	11.8	75.5
	Analysis:	The OI climbed almost 15% this period with activity coming from the large specs.  They are now long 74.3% of the total OI in the DI, and are a 4 to 1 long. Small trader are also unbalanced at a 3 to 1 long but have a small percentage of this market.
EUR	Contracts:	280,525	33,433	116,633	44,788	57,553	155,081	59,116
	Change:	41,317	-7,208	2,549	-883	4,602	36,061	20,818
	% Open Interest:		11.9	41.6	16.0	20.5	55.3	21.1
	Analysis:	The biggest currency futures market had the OI surging by 15%, mostly from commercial activity as they increased both longs and shorts. Both the large and small specs added to existing positions by decreasing longs and adding to their shorts.  Large specs are over a 3 to 1 short in this market.
GBP	Contracts:	150,211	12,123	78,860	18,778	34,180	108,031	25,892
	Change:	2,026	643	-4,437	1,733	262	-639	5,912
	% Open Interest:		8.1	52.8	12.5	22.8	71.9	17.2
	Analysis:	Large specs remain a 6.5 to 1 short in this market though they did cover a small portion of their shorts during the period.  Small specs are also short the pound but in much smaller ratios.  There was further liquidation of the OI toward the end of the week, but it looks like the specs remain entrenched, short the pound.
JPY	Contracts:	124,947	17,718	47,158	19,581	40,956	77,453	26,638
	Change:	17,687	-23,386	17,652	-441	11,011	38,533	-13,957
	% Open Interest:		14.2	37.7	15.7	32.8	62.0	21.3
	Analysis:	The OI climbed, the yen went down during the period, and the large specs and commercials both flipped their positions.  Both the small and large specs reduced longs and increased shorts with both groups over a 2 to 1 long.  Market action favored the specs at the end of the week.
CHF	Contracts:	30,682	6,481	13,350	10,655	10,381	12,045	5,460
	Change:	-2.562	-2,602	2,847	-2.270	819	2,186	-6,352
	% Open Interest:		21.1	43.5	34.8	33.8	39.3	17.8
	Analysis:	The small specs and large specs are on different sides of the market, and the commercials flipped to a long position.  The OI went down a bit as traders are perhaps spooked by the central bank intervention.
CAD	Contracts:	163,810	89,029	17,545	47,245	17,135	21,264	122,857
	Change:	-465	-1,918	1,036	-2,254	-1,080	3,547	-579
	% Open Interest:		54.3	10.7	28.8	10.5	13.0	75.0
	Analysis:	All three major groups are clinging to their positions as the C$ grinds toward parity with the USD.  Large spec longs did modestly reduce longs, but they remain a 5 to 1 long and committed to their cause.  The OI in the C$ is second only to the euro, which illustrates the breath of interest in the loonie.
NZD	Contracts:	17,143	13,049	7,243	3,021	888	1,073	9,012
	Change:	-456	-572	-889	337	-424	-221	857
	% Open Interest:		76.1	42.3	17.6	5.2	6.3	52.6
	Analysis:	Small liquidation in this tiny market.  The large specs pwn 76.1% of the total OI.  The IMF says the kiwi is 15% overvalued, but this does little to dispel enthusiasm of the longs.
AUD	Contracts:	148,012	80,270	10,129	35,423	17,242	29,698	118,021
	Change:	741	-4,542	351	2,189	599	3,314	12
	% Open Interest:		54.2	6.8	23.9	11.6	20.1	79.7
	Analysis:	The OI in the AUD stopped growing the past period.  Large specs did sell out a few of their longs, but they remain an 8 to 1 long.  Small specs are a much smaller long but added to their positions, and are now long 23.9% of the OI.

*Source: CFTC (Commitments of Traders with Delta-adjusted Options and Futures Combined) Actual Report

Commitment of Trader (COT) Report: Every Friday the CFTC releases data about futures/options trading activity by market segment in various markets including currencies.  Positions for each currency are classified into 3 groups: large speculators, small speculators, and commercial traders.  If interpreted correctly this data can be useful in forecasting price trends in the spot forex market.  The table below contains a condensed version of currency trader?s collective market votes.  Interpretation of this data is definitely an art rather than a science.  With that caveat, you may view the latest COT analysis for each currency in the analysis fields of the table below.  *See below for definitions and additional information about the COT Report and analysis.

The CFTC breaks open futures contracts into reportable positions and non reportable positions.  Reportable positions are further broken down into commercial and non-commercial positions.  Though commercial reportable positions may be a very large portion of the open interest, the commercials activity in the futures market is an adjunct to other business activity.  There may indeed be speculating in some cases, but they may also be responding to many factors such as manufacturing, purchase and sales of products, or investment overseas, or repatriation of capital or profits from abroad.  Or they may be banks hedging their overseas loans or currency positions.  As hedgers they may be more concerned with futures as an insurance policy than a profit center.

While price movement is not the major concern of the commercial user, it is the lifeblood of the large and small trader.  It is for that reason that we analyze the activities of the speculators in detail and ignore the commercials positions.

Reportable positions are usually held by the wealthy experienced successful traders and or a combine of participants.  That does not mean that their every trade is a winner. However to hold a reportable currency position is not for the faint of heart and requires a well funded account and probably a friendly banker.  Non reportable positions are those of the smaller trader.  Conventional wisdom says the little guy is generally on the losing side of the market.  Naturally there are exceptions to all rules, but both groups are responsive to price action.

How to use COT Report:  There are 3 main ways the COT report is used to forecast price trends in the spot forex market.

1)  Extreme Positions:  If everyone is already long or short it is a strong indication price may reverse because there is no one left for buyers to buy from and no one left for sellers to sell to.

2)  Changes in Market Positions: When large speculators change their position and go from net long to net short or vice versa, there typically is a good reason they do this.

3)  Changes in Open Interest: Rising or falling open interest may reflect directional commitment or lack thereof and therefore indicate strength or potential reversal of a particular price trend.

Terminology & Types of Traders:

a)  Non-Commercial Reportable Traders: (Large Traders) Large speculators, also referred to as large spec, whose position size requires reporting to the CFTC

b)  Nonreportable Traders: (Small Traders) Typically smaller speculators, also referred to as small spec, whose position size does not require reporting to the CFTC.

c)  Commercial Reportable Traders: (Commercial Traders) Traders engaged in business activities hedged by the use of the futures or option markets.

d)  Open Interest (OI):  Open interest, also referred to as OI for short, is a trade, long or short, that has not yet been offset or closed out.  For every long, there is a short.  Every buyer must find the price at which a seller will sell.  Day traders who get in and out on the same day do not add to the OI.

e)  Net Short and Net Long: In the case of Net Long, a particular market segment (i.e. large speculators) has more long positions with open interest than short positions.  The opposite applies to Net Short.

Click here for previous COT Analysis Postings  |  Click here for CFTC page about the COT Report