COT: Continued dollar buying at the expense of yen
Head of Commodity Strategy
Summary: Speculators reversing back to a short JPY position gave the dollar long another boost last week.
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.
Speculators continued to buy dollars in the week to October 15. The combined long against ten IMM currency futures reached $20.5 billion, a four-month high. The change was led by heavy selling of JPY which resulted in the position returning to a net short for the first time since late July.
The near 5% spike in Sterling failed to trigger much excitement with equal reductions in both short and long positions leaving the net-short unchanged at 73k lots, the least bearish since July but still elevated.
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.