
COT: Speculators sold dollars ahead key risk events

Ole Hansen
Head of Commodity Strategy
Summary: During the week to August 20 and ahead of last week’s major risk events speculators opted to cut bullish dollar bets against ten IMM currency futures.
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
Ahead of last week’s major risk events speculators opted to cut bullish dollar bets against ten IMM currency futures by $1.5bn to $10.9bn, a 14-month low. Continued buying of JPY lifted the net-long by 26% to the highest since November 2016.
The biggest contributor to the reduced dollar long came perhaps a bit surprisingly from the Euro after speculators bought into the weakness below €1.11.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.