COT Report Data 04 20 2010

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Data and Analysis for Most Recent Release

Legend:	Net Long	Net Short	Position Change

Overview:  The open interest (OI) was little changed during the period, a net increase of only 12,499 contracts.  The major increase in the OI was in the euro, up almost 11,000 contracts.  Net positions versus the USD did not change much.  Specs are long the DI, and long the USD short the euro, pound, yen and the SF by a total of 244,432 contracts.  They are short the USD and long the C$, the A$ and the NZ$ by 213,412,  so the total net USD position is long 31,020 contracts down from last week's 34,609 contracts.

The largest small spec long positions are in the SF 33.7%, the C$, 32.4% and the A$, long 25.1% of the market.  Small specs biggest short positions are in the SF 33.0%, the yen 30.9% and the pound 23.7%.

Biggest spec shares of the market on the long side: NZ$ 80.9%, the DI 68.4%, and the A$ 55.0%.  On the short side, the biggest positions were in the pound, 47.3%, the yen 42.9%, and the SF 42.6%.  There was a surge in the SF open interest after the end of the period. 

The large specs, or funds, are often the leader in anticipating a move in the market, which can be a change in direction, or an additional leg to an existing move.   The most valid signals come when the OI is going up.  The spec activity in the euro, extending their short is a vote for a lower market.  In the NZ$, they increased longs and reduced shorts, a bullish vote.  Finally in the C$ they were liquidating longs and shorts , maybe a sign they think the move is over.

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	45,924	31,121	6,424	5,177	2.704	6,692	34,161
	Change:	-2,087	-1,705	945	-343	-64	-75	-3003
	% Open Interest:		68.4	14.0	11.3	5.9	14.6	74.4
	Analysis:	Large traders who have been big longs in the DI scaled back positions marginally during the period, reducing longs by1705 contracts and increasing shorts by 945.  They remain a 4.8 to 1 long in this market.  Small specs, not big players in this market are a 2 to 1 long but were also reducing positions during the period.
EUR	Contracts:	259,415	34,745	103,063	47,571	52,624	137,881	64,509
	Change:	10,964	273	17,199	2,993	-4,823	6,516	-2,595
	% Open Interest:		13.4	39.7	18.3	20.3	53.2	24.9
	Analysis:	The large and small specs were going different directions in this market.  Large specs added to their shorts by almost 17,000 contracts, while the small spec was bought an additional 2993 contracts and reduced shorts by 4,823.  The large spec is now a 3 to 1 short in the euro.  The OI , which went down last week was back up by almost 11,000.
GBP	Contracts:	135,268	15,230	63,950	19,731	32,069	92,270	31,312
	Change:	6	691	-7,319	1,944	2,522	-3,347	4,085
	% Open Interest:		11.3	47.3	14.6	23.7	68.2	23.1
	Analysis:	All participants were busy shuffling their positions but the OI changed by only 6 contracts.  The large spec remains an unbalanced short 4.1 to 1 long but their share of the short OI went down from 52.7% to 47.3%.  Small specs increased their short positions and are now short 23.7% of the OI.
JPY	Contracts:	148,539	15,408	64,710	16,656	45,898	107,266	29,722
	Change:	3,713	950	-4,758	-425	3,327	1,554	3,509
	% Open Interest:		10.4	42.9	11.2	30.9	72.2	20.0
	Analysis:	It is interesting to observe that the large spec was reducing his short position during the period while the small spec was increasing his, which is now up to 30.9% of the total market.  The short side of the yen has become very popular among the specs.
CHF	Contracts:	35,886	9,852	15,302	12,090	11,837	12,460	7,363
	Change:	-395	-445	-240	-386	-611	335	356
	% Open Interest:		27.5	42.6	33.7	33.0	35.0	25.5
	Analysis:	Small specs and commercials are on the same side of the market, long, while the large spec is the short in the market.  After the end of the period, there was an upward surge in the OI, as the SF lost to the USD.  Small specs have a very large share in this market but are evenly balanced.
CAD	Contracts:	160,590	82,990	12,642	51,866	20,303	21,512	123,423
	Change:	-1.176	-5,324	-4,560	3,458	1,907	-494	293
	% Open Interest:		51.7	7.9	32.4	12.6	13.4	76.9
	Analysis:	The large spec started to reduce both longs and shorts in this market as the value of the loonie flirted with parity to the USD.  Large specs, probably funds remain a 6.5 to 1 long in this market.  Small specs remain enthusiastic supporters of the C$, and own 32.4% of the total OI.
NZD	Contracts:	17,911	14,497	5,745	2,906	1,397	508	10,771
	Change:	371	726	-875	-206	234	-149	1,012
	% Open Interest:		80.9	32.1	16.2	7.8	2.8	60.1
	Analysis:	The large spec added to his positions in this market by increasing longs and reducing shorts.  There are 17 large specs who are long 80.9% of the market.  Small specs though not big players in this market reduced longs and modestly increased shorts.
AUD	Contracts:	158,839	87,330	7,788	39,940	18,244	29,292	130.530
	Change:	1,103	-1,301	122	-126	211	2,299	540
	% Open Interest:		55.0	4.9	25.1	11.5	18.4	82.2
	Analysis:	Large specs, probably funds are really committed to the AUD, long by a 11.2 to 1 ratio.  There are 39 large players who are long 55% of the OI.  Small spec are also on the long side, 25.1% of the total OI, but reduced their net positions modestly during the period.  With the C$, the Aussie remains the favorite spec long.

*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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