COT Report Data 11 30 2010

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Data and Analysis for Most Recent Release

Legend:	Net Long	Net Short	Position Change

Overview: There was an increase in the open interest (OI) during the period by a total of 33,474 contracts.  The biggest increase was in the euro, up 38,458 contracts.  There were also increases in the yen, 3,788, and the SF, 3,584.  The largest decreases in the OI were in the pound, 5,675 contracts, and the C$, 4,691 contracts.  In the euro spreading increased by 10,877 delta adjusted contracts, meaning that option traders are actively involved in the trading the volatile euro.  It will be interesting to see how much the OI comes down as the Dec contracts expire.

Total large and small spec positions in the USD decreased to 133,119 contracts, and represents a reduction from last week's short USD position of 155,170.  The largest long something else and short the USD remains in the commodity currencies, although specs are long 24,267 yen contracts.  The pound is the only currency where the specs are short, and by default long the USD.  

All three groups flipped their positions in the pound during the period.  The big build up in the euro OI was on down days, and the market reversal came after the period's end.

Small specs had the biggest long percentage of the market in the C$, 37.9%, the SF, 35.0%, and the A$, 26.3%.  The largest small spec market share was in the pound and the yen, 22.8%, and the SF 22.3%.

Large specs had the biggest share of the market in the NZ$, 83.3%, the DI 55.4%, and the yen 37.78%.  Their biggest shorts were in the pound 27.8%, and the DI 26.4%

			(1) Large Traders		(2) Small Traders		(3) Commercial
		Total OI	Long	Short	Long	Short	Long	Short
USD Index	Contracts:	35,522	19,672	9,390	5,325	3,055	8,381	20,933
	Change:	852	-2,535	-802	216	-110	2,473	1,066
	% Open Interest:		55.4	26.4	15.0	8.6	23.6	58.9
	Analysis:	Large traders reduced their longs more than they reduced their shorts in the period.  They remain a 2 to 1 long in this small market.  Small specs added to their longs.  The late week sell off in the USD happened after the end of this reporting period.
EUR	Contracts:	292,460	50,453	55,706	68,127	61,214	116,933	118,593
	Change:	38,458	5,758	3,018	9,915	13,877	11,908	10,687
	% Open Interest:		17.3	19.0	23.3	20.9	40.0	40.6
	Analysis:	The OI increased by 13.1% during the period.  It is interesting to note that the euro versus the USD was a hard down, ending the period a little under 1.30.  On the Friday close three days after the end of the period, the market had reversed and closed above 1.34.  This means that most of the increase in the OI was done at lower prices, and these trades are losers by Friday. The weekly chart which is different from the reporting period for COT purposes shows a reversal candle.  There could easily be more short covering in the euro.  Spreading was up 10,877 contracts, and now accounts for 19.5% of the OI.  This is primarily option trades involving spreads or covered puts and calls.  Small spec positions in the euro exceeds the big spec positions, not the usual COT configuration.  All groups have positions that are close to even suggesting traders have mixed views about the future euro direction..
GBP	Contracts:	98,723	26,489	27,454	20,572	22,555	44,398	41,449
	Change:	-5,675	-10,793	2,617	-4,056	365	7,265	-10,567
	% Open Interest:		26.8	27.8	20.8	22.8	45.0	42.0
	Analysis:	This was a very interesting week in the pound.  The OI was down 5+% as the large specs liquidated their pound longs and the commercials took the other side of the trade.  All groups flipped their positions, a rarity, during the period.  The total OI was down slightly but the spreading was  up 1,909 contracts to 7.4% of the OI.  Specs moved from a net long in the pound of almost 15,000 contracts to a net pound short of almost 3000 contracts. Since the OI was declining there may not be as many positions that turned sour on the late week rally in the pound, which would lead to more short covering.
JPY	Contracts:	148,921	56,284	24,948	27,579	34,017	56,404	81,302
	Change:	3,788	4,397	1,636	-1,577	551	361	995
	% Open Interest:		37.8	16.8	18.5	22.8	37.9	54.6
	Analysis:	Large specs added to their long position in the yen and are now better than a 2 to 1 long.  Small specs continue to be short the yen, making a modest increase in the short yen position.  The late week action, after the end of the COT period, favored the yen longs.
CHF	Contracts:	46,808	16,353	8,156	16,388	10,453	12,570	26,702
	Change:	3,584	1,513	2,209	-115	-1004	2,035	2,228
	% Open Interest:		34.9	17.4	35.0	22.3	26.9	57.0
	Analysis:	Specs continue to favor the long side of the SF.  The large spec is a 2 to 1 long while the small spec is long 35% of the total market.  Late week action favored the longs.  There is not much change in this week's numbers.
CAD	Contracts:	110,532	31,779	10,648	41,885	18,336	32,228	76,909
	Change:	-4,691	-5,773	-2,767	507	-1,896	-640	-1,242
	% Open Interest:		28.8	9.6	37.9	16.6	29.2	69.6
	Analysis:	The OI went down during the period as the large spec reduced his positions, both longs and shorts.  At period's end, the large spec remained about a 3 to 1 long.  The small specs are long 37.9% of the OI, and added to their position, but there was little feature in the loonie during the week.
NZD	Contracts:	27,575	22,982	4,537	3,292	1,236	1,301	21,802
	Change:	-3,394	-3,113	-489	62	453	-343	-3,358
	% Open Interest:		83.3	16.5	11.9	4.5	4.7	79.1
	Analysis:	Sixteen large specs are long 83.3% of the total OI, and remain in charge of this very small market.  It will be interesting to see how this OI is liquidated as we approach the expiration of the Dec contract.
AUD	Contracts:	129,669	45,459	17,283	34,068	19,496	45,049	87,797
	Change:	552	-1,658	-781	269	1,005	1,176	-437
	% Open Interest:		35.1	13.3	26.3	15.0	34.7	67.7
	Analysis:	Spec interest remains strong in the commodity currencies.  There was some liquidation in the A$ by the large specs, but they remain a 2.5 to 1 long.  Small specs are also long the A$, but by a smaller ratio.  There should be some steady liquidation as the Dec contract expires.

*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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