
COT: Dollar short climbs further with euro in demand

Ole Hansen
Head of Commodity Strategy
Summary: The COT report on FX, bonds and stocks tracked the market reaction to the March 23 announcement of open ended QE by the US Federal Reserve. Stocks rose and credit recovered while dollar continued to be sold, especially against the euro.
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.
The below summary highlights futures positions and changes made by speculators across forex, bonds and stocks up until last Tuesday, March 31. This period tracked the aftermath of the March 23 announcement of ‘open ended’ QE by the US Federal Reserve. A decision which saw stocks rise, credit recovered while the dollar weakened.
In forex the net dollar short against ten IMM currency futures and the Dollar Index continued to climb. This time the selling was, as opposed to the previous few weeks, supported by broad-based dollar weakness. Once again the main driver was continued buying of the euro as the net-long rose by 21% to reach 74k lots, the highest level since mid-June 2018.
Elsewhere the period saw selling of Pounds for a fourth week, a 23% reduction in the Yen long and the first reduction in the Canadian dollar net-short in five weeks. Nine weeks of selling and a one-third drop in the price took the Mexican peso long to the weakest in 15 months.
Major reductions of both long and short positions left the Cboe VIX net short close to unchanged at 18k lots, the least short in 14 months.
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.