COT Report Data 08 17 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 by 13,250 contracts during the week, not a big change.  The biggest increase in the OI was in the euro and the A$ while the biggest decrease in the OI came in the C$ and the yen.  In the euro the large spec flipped to a short position, while the small spec flipped to a very small long position.  All three major groups flipped their position in the pound.  The biggest shift was by the large spec to the short side.

The total spec OI long another currency and by default short the dollar declined this week to 159,403 contracts down from 190,610 in the previous week.  A reduction in the C$ long and a small increase in the A$ long accounted for the biggest shifts.

Small specs had the biggest percentage share of the C$, 37.6%, the SF, 27.8%. the A$, 22.8% and the yen, 20.3%  The large share of the small specs on the short side is in the yen, 22.6% and the SF at 18.5% of the total.  The largest big spec long positions is in the DI, 76.7%, the NZ$, 75.8% and the A$ at 56.2% of the market.  Largest large spec short positions is in the NZ$ at 25.8% and the DI with 23.4% of the total market.

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	32,292	25,521	6,775	4,327	2,224	1,513	22,362
	Change:	3,202	3,174	-23	-182	-789	137	3,941
	% Open Interest:		79.0	21.0	13.4	6.9	4.7	69.3
	Analysis:	The OI climbed 10% during the period as the large specs bought from the commercials.  Large specs are now 3.8 long  to 1 short.  Small specs, not big players in this small market are a 2 to 1 long.
EUR	Contracts:	306,755	60,312	71,789	57,361	56,775	152,024	141,133
	Change:	16,467	8,690	15,836	7,410	3,391	3,978	852
	% Open Interest:		19.7	23.4	18.7	18.5	49.6	46.0
	Analysis:	The total OI did not change that much but the spec players were busy changing their positions.  The large spec flipped from a long to a short position in the euro.  The small spec also flipped positions from a short to a long, however the small spec position is very evenly balanced showing this group has little unanimity in their market assessment.  Spreading which is primarily option activity is down to 12.1% of the OI.
GBP	Contracts:	159,157	31,172	34,980	27,501	25,230	90,515	88,977
	Change:	-5,050	-2,474	3,809	2,262	-1,511	-1,773	-4,282
	% Open Interest:		19.6	22.0	17.3	15.9	56.9	55.9
	Analysis:	It is very rare to see every major group flip their position in the same week, but this did happen with the pound during the period.  The OI declined modestly which might suggest that specs were throwing in the towel on their positions.  We now have the small spec and the commercial long the market and the large spec is short.  Generally the two spec groups trade in concert.  Often the large spec is quickest to pick up a change in market direct, and he went short the pound.
JPY	Contracts:	152,254	63,299	12,606	30,836	34,373	51,058	98,215
	Change:	1,023	-2,421	-365	178	1,934	2,848	-965
	% Open Interest:		41.6	8.3	20.3	22.6	33.5	64.5
	Analysis:	For most of the period the USD/JPY was trading close to the 85 handle.  The lack of significant change in the OI would suggest an indifference to the market at this level.  The large spec remains an unbalanced 5 to 1 long in the yen while the small spec is a modest short.
CHF	Contracts:	58,743	17,568	6,826	16,337	10,890	22,831	39,020
	Change:	2,515	1,304	534	1,868	-498	-1,116	2,021
	% Open Interest:		29.9	11.6	27.8	18.5	38.9	66.4
	Analysis:	Specs were modestly on the buy side of the Swissy during the period.  The large specs are now about a 2.5 to 1 long.  There was little movement during the period.
CAD	Contracts:	107,213	34,888	4,560	40,270	18,663	26,585	78,521
	Change:	-10,195	-12,180	-486	-5,262	1,785	6,859	-11,882
	% Open Interest:		32.5	4.3	37.6	17.4	24.8	73.2
	Analysis:	The OI was down during the period as the large spec liquidated a big portion of their long.  Despite the selling the large spec is still a 7.5 to 1 long.  Small specs likewise sold part of their long and added to their short.  With 37.6% of the total OI the small specs are the biggest players on the long side of the loonie.
NZD	Contracts:	23,627	17,595	5,456	2,803	1,765	3,229	16,406
	Change:	-1,409	-1,397	-992	-608	677	1,340	-350
	% Open Interest:		74.5	23.1	11.9	7.5	13.7	69.4
	Analysis:	The large spec now owns 74.5% of the total OI in this very small market but was a seller during the period of both longs and shorts.  Small specs remain a small long though they did reduce their long and increase their short.
AUD	Contracts:	128,643	71,243	13,452	29,336	17,905	24,608	93,830
	Change:	6,697	2,733	-713	872	-22	2,686	7,026
	% Open Interest:		55.4	10.5	22.8	13.9	19.1	72.9
	Analysis:	There was a small increase in the OI during the week as both large and small specs bought a little and modestly reduced their shorts.  The large spec is now a 5 to 1 long.  The election was yesterday and with over 70% of the vote counted the results are too close to call.  The spec position in the A$ is the biggest one that by default is short the USD.

*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