Commitment of Traders Report

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Data and Analysis for Most Recent Release

Legend:	Net Long	Net Short	Position Change

Overview: The open interest (OI) had a very modest increase during the period.  The biggest increase was in the A$, up 10,069 contracts followed by the Euro, up 7.015.  There was some small liquidation in the yen and the DI.

The DI, euro and the pound are the only contracts where the specs have long position in the USD.  The biggest net short USD positions are in the A$, 50,135, the C$ 45,751, and the yen 30,372.  Small specs did flip their position to the short side in the yen.

The biggest small spec long percentage of the market was in the C4 at 40.0% followed by the SF at 28.2% of the total and the A$ at 27.5% of the OI.  On the short side the small specs were short a little over 20% in the pound, the euro and the yen.

Large specs held their biggest long positions in the NZ$, 80.3%, the DI at 72.1% and the A$ at 52.7%.  Largest short positions were in the A$ and the euro, both a little above 25%.

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	22,919	16,519	2,532	4,159	2,181	1,456	17.422
	Change:	-1,644	-1.207	-695	372	163	-169	-472
	% Open Interest:		72.1	11.0	18.1	9.5	6.4	76.0
	Analysis:	The large spec has reduced his long position but remains almost a 7 to 1 long.  Small traders are a little less than a 2 to 1 long in this very small market.
EUR	Contracts:	299.001	49,836	75.183	49.548	60,935	150,952	114,219
	Change:	7,015	-228	-1,042	877	713	2,525	3,502
	% Open Interest:		16.7	25.1	16.6	20.4	50.5	38.2
	Analysis:	There was an increase in the OI of the euro during the period but most of this appears to be option spreading.  Spreading increased to 16.3% of the OI.  Despite the rally in the euro specs remain short though their positions have been reduced.
GBP	Contracts:	143,350	15,386	36,990	17,421	29,493	98,576	64,900
	Change:	1,354	121	-6,291	561	4,938	-636	1,398
	% Open Interest:		10.7	25.8	12.2	20.6	68.8	45.3
	Analysis:	The OI climbed a little during the period as the small specs increased their short positions.  Specs , large and small, have remained short the pound during the entire rally, which probably gives us short covering on the way higher.  The big spec did cover some of his short but remains over a 2 to 1 short.
JPY	Contracts:	149,130	49,296	18,263	29,558	30,219	52,854	83,226
	Change:	-2,498	-5,912	4,020	-1,678	4,358	4,481	-11,487
	% Open Interest:		35.2	13.0	21.1	21.6	37.7	15.4
	Analysis:	Small specs flipped from a long to a short during the period and are now short 21.6% of the OI.  The large spec is long by a little less than 3 to 1.  We now have the little spec and the commercial on the same side of the market (short), making for strange bed fellows.
CHF	Contracts:	59,253	14,841	9,486	16,701	9,482	26,362	38,936
	Change:	611	-4,735	4,075	1,092	-260	4,260	-3,198
	% Open Interest:		25.0	16.8	28.2	16.0	44.5	65.7
	Analysis:	The SF OI is large with the small spec quite active, long 28.2% of the total.  With the SNB removing the threat of intervention, specs are now placing their bets on the long side of the franc.
CAD	Contracts:	99,317	26,644	2,107	39,750	18,536	25,665	71,416
	Change:	1,939	2,376	-3,972	-1,619	776	20	3,972
	% Open Interest:		26.8	2.1	40.0	18.7	25.8	71.9
	Analysis:	The large spec has further reduced his short in the C$ to where it is a measly 2.1% of the total market, which leaves him about a 13 to 1 long.  Small specs though are the big players here, long 40% of the OI.
NZD	Contracts:	22,919	18,398	4,724	3,115	1,158	1,407	17,037
	Change:	4,288	3,875	-826	517	-36	-104	5,150
	% Open Interest:		80.3	20.6	13.6	5.1	6.1	74.3
	Analysis:	There was a big percentage increase in the OI of this small market, led by the hedge fund types who are now up to over 80% of the long side of the kiwi.  Large specs are a 4 to 1 long and the small spec is about a 2.5 to 1 long.
AUD	Contracts:	97,572	51,439	10,614	26,806	17,488	15,578	65,712
	Change:	10,069	6,168	-1,756	1,817	-1,196	1,399	12,337
	% Open Interest:		52.7	10.9	27.5	17.9	16.0	67.3
	Analysis:	Less fears of a big slow down in China combined with a new administration have brought the buyers back to the A$.  The charge is lead by the big specs who now have over a 50% stake in the A$ futures.  We would think the cash forex is even more attractive with the high bank rate.

*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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