COT: Speculators keep buying USD despite stall signs

Ole Hansen

Head of Commodity Strategy, Saxo Bank Group

To download your copy of the Commitment of Traders: Forex report for the week ending August 21, click here

To download your copy of the Commitment of Traders: Financials report for the week ending August 21, click here.

Despite some emerging signs of consolidation speculators nevertheless increased their bullish dollar bets against nine IMM currency futures by a net 8,000 lots, or $0.3bn, to $24.5bn in the week to August 21. This was the week where the dollar retraced some of its recent gains after President Trump went on the attack against Federal Reserve chair Jerome Powell for raising rates and thereby supporting the stronger dollar. 

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The last time traders were this bullish the greenback was in January 2017 when the dollar index had reached a 14-year high at 103.80, some 8% above where it trades today.
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The changes last week were driven by selling of EUR, CHF, and GBP offsetting buying of JPY. Selling of the euro continued after speculators flipped their position over the previous week to a net-short for the first time since May 2017. Ongoing selling of the CHF took the net-short to 47,000 lots, the most bearish since 2007. 

Financials

In fixed income, leveraged funds made a small reduction in their short duration. Largely due to a reduction of short positions in three-month Eurodollar futures and T-bonds. At the belly part of the curve, the record short in 10-year notes extended further to 700,000 lots despite the continued drop in yields and flattening yield curve.

In equities, traders increased their e-mini S&P short position by 38% while also trimming the VIX short by 23% to 102,000 lots. 
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