COT: Accelerated dollar selling into 2020
Head of Commodity Strategy
Summary: Speculative dollar selling accelerated during the first full week of trading. Against ten IMM currency futures the net dropped 54% to an 18-month low
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.
Five weeks of selling has driven the speculative dollar long against ten IMM currency futures and the Dollar Index down to just $5.6 billion, the lowest bets on a stronger dollar in 18 months. The first week of trading was particularly brutal with the dollar being sold against all the major currencies.
The carry supported MXN reached a nine-month high last week and is now challenging the dollar as the most popular long. The GBP long meanwhile reached 16.5k lots, the most bullish since May 2018 while EUR net shorts were trimmed to the least since November.
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.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winners
Understanding the lack of investment appetite among oil majors
The pressure is on as the wind leaves the sails
Why the Fed can never catch up and what turns the US dollar lower?
Bank of Japan: Swimming against the tide
Green transformation detour and bear market hibernation
Crisis redux for the eurozone?