COT Report Data April 6, 2010

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Data and Analysis for Most Recent Release

Legend:	Net Long	Net Short	Position Change

Overview: During the period ending April 6, 2010, the open interest (OI) increased but, only by a modest 10,879 contracts.  The contracts with the largest increases were the yen, 17,892 contracts, and the A$, 8,893 contracts.  The dollar index OI declined 10,316, and the euro was down 9,173 contracts.  Overall specs are long the USD and short something else by a gross number of 46,935 contracts.  The biggest sort currency and long the USD are in the pound 77,017 contracts, followed by the euro 73,813 and the yen 64,777.  The largest short USD positions are in the 'commodity currencies' where there are 98,918 contracts of long C$ and 97,228 long A$.

Small specs have the biggest long share of the market in the SF, 36.4%, followed by the C$, 28.2%, and the A$, 25.7%.  The largest small spec short positions are in the SF at 33.4%, the yen 30.3% and the pound 24.3%.  Large specs continue entrenched with their big long positions in the NZ$, 79.1% and the DI 68.3%, though they also have big longs in the A$ and the C$. Largest big spec short positions of the markets are in the pound at 50.1% down a little from last week's 52.8%, and the NZ$ at 45.2%  There has been a recent surge in big spec short positions in the yen, now up to 42.5% if the yen OI.  The only market where the small and large spec are on different sides of the market is the SF were the big guy is short and the little spec long.

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	51,634	35,264	5,016	5,952	2,894	7,652	40,958
	Change:	-10,316	-10,748	-5,708	133	1,250	351	5,806
	% Open Interest:		68.3	9.7	11.5	5.6	14.8	79.3
	Analysis:	Large traders were busy reducing both longs and short in this period.  OI was down over 10,000 contracts.  The large spec remains long 68% of the OI and is a 7 to 1 long.  Small traders, though now active in this market are a 2 to 1 long.
EUR	Contracts:	271,352	39,420	103,437	45,613	55,409	137,149	63,336
	Change:	-9,173	5,987	-13,196	825	-2,144	-17,932	4,220
	% Open Interest:		14.5	38.1	16.8	20.4	50.5	23.3
	Analysis:	A modest reduction occurred in the OI with the large soec reducing his short position by 13,000 contracts and the commercial reduced his long by almost 18,000.  The large spec remains a 2.6 to 1 short in the euro.  Little movement of feature during the period.
GBP	Contracts:	145,894	14,739	73,087	16,800	35,469	103,829	26,812
	Change:	-4,316	2,616	-5,773	-1,978	1,289	-4,202	920
	% Open Interest:		10.1	50.1	11.5	24.3	71.2	18.4
	Analysis:	Specs remain committed to the short side of the pound.  The large spec did reduce his position, but remains short over 50% of the OI, and is a 5 to 1 short. Small specs added to their net short during the period.
JPY	Contracts:	142,840	19,544	60,660	19,665	43,325	90,873	26,096
	Change:	17,892	1,826	13,502	84	2,369	13,420	-542
	% Open Interest:		13.7	42.5	13.8	30.3	63.6	18.3
	Analysis:	The OI climbed by over 12% during the period, as both the large and small specs added to their short yen positions. The large specs now have a 3 to 1 short position and are short 42.5% of the OI.  Market action has favored the shorts during the period.  The futures OI did go up over 15,000 contracts after then end of the weekly summary.
CHF	Contracts:	35,347	9,645	13,844	12,868	11,795	10,916	7,790
	Change:	4,665	3,164	494	2,203	1,413	-1,129	2,330
	% Open Interest:		27.3	39.2	36.4	33.4	30.9	22.0
	Analysis:	Both the large and the small specs were on the buy side during the period.  The large and the small specs are on different sides of the market.  The large specs is short and the small spec is on the  long side with the commercial.  Small specs have a very large presence in the SF.
CAD	Contracts:	167,966	90,476	19,274	47,425	19,710	22,258	121,176
	Change:	4,156	1,448	1,729	181	2,575	994	-1,682
	% Open Interest:		53.9	11.5	28.2	11.7	13.3	72.1
	Analysis:	The OI in the C$ continued to grow, but at a smaller pace.  The large specs, probably commodity funds, are now long over 50% of the OI. The biggest participant, increasing his position was the small spec, a seller, as the loonie flirted with parity.
NZD	Contracts:	16,221	12,836	7,333	2,779	1,324	606	7,564
	Change:	-922	-213	90	-242	436	-467	-1,448
	% Open Interest:		79.1	45.2	17.1	8.2	3.7	46.6
	Analysis:	The large spec did sell a few contracts but remains long 79% of this tiny market.  The small spec also sold dome longs and added to shorts in modest fashion.
AUD	Contracts:	156,905	84,290	10,179	40,393	17,277	29,259	126,487
	Change:	8,893	4,020	50	4,970	35	-439	8,466
	% Open Interest:		53.7	6.5	25.7	11.0	18.6	80.6
	Analysis:	The small spec added to his long by almost 5000 contracts and is now a 2.3 to 1 long.  The large spec remains an 8 to 1 long in this market.  OI grew, but only modestly during the period, and the A$ remains the third largest futures contract behing the euro and the C$.

*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.

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