Head of Commodity Strategy
Summary: Speculators bullish dollar conviction remains fragile with only modest buying seen despite the Greenback toying with a two-year high.
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 bought a modest amount of dollars during the week to October 1. Four consecutive weeks of buying have taken the net long against ten IMM currency futures to $17.6 bn, still only around half the $34.6 bn recorded back in April. This despite seeing the dollar toy with a two-year high in recent weeks.
They increased short positions on the EUR and CHF, while marginally adding to net-long positions on the JPY and CAD. The minor currencies saw some action with record short positions seen in NZD and BRL, while the MXN was bought to maintain its role as the second most favored long (carry) after the Greenback
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.