Head of Commodity Strategy
Summary: Speculators bought dollars in the week to September 3 when the market hit peak pessimism on trade and growth. Buying most noticeable against EUR, JPY and CAD
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.
In the week to September 3 the non-commercial dollar long against ten IMM currency futures rose by 26% to $13.1 billion, a five-week high. This was the day when peak pessimism on trade and growth helped send the dollar to a 28-month high against the euro before reversing course the following day.
The bulk of the dollar buying was against the euro where the break below €1.10 helped drive a 10,332 lots rise in the net-short. The stronger dollar also helped reduce the JPY net-long from a near three-year high to 27,682 lots. Bearish Sterling bets were reduced for a fourth week to 84,959 lots but the Brexit troubled currency remains the most favored short by speculators.
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.