CFTC Data Shows Futures Speculators Buying Into Recent Dollar Strength

Author: betandbingo
Published: November 18, 2012 at 3:03 pm

The US (Washington based) Commodity Futures Trading Commission releases a report on Fridays called the "COT report" which shows how various groups are positioned in the futures market for the prior Tuesday. The "Commitment of Traders" report reveals trader positioning in many of the markets where futures contracts are traded. This is often seen as an insight into how hedge funds and other large institutions are positioned in various markets.

A couple of weeks ago the report showed that speculative traders from the CME (Chicago Mercantile Exchange) held the smallest bearish US dollar wager since late August, as traders essentially cut back on wagers against the greenback through various futures market currency bets. Market participants buy or sell other currencies which are denominated against the USD and this data is factored in to the overall picture.

Further to this the COT report released last week revealed that the aggregate FX futures market position was now net USD (US dollar) long for the first time since the end August. The $320 million net position against the USD from the previous week had essentially transformed to a $3.1 billion long USD position for the latest reporting period. It should be noted that the COT report does not provide the latest up to date information, as there is an inherent delay in reporting, but it can be a useful reference when trying to understand longer term currency flows, if used within the right context.

Uncertainties based around the fundamental backdrop in Europe have weighed on the euro, which is the most commonly traded currency against the dollar via the EUR/USD (euro/dollar) pair. Last week had this key currency pair post a modest gain, after four previous consecutive weekly basis declines, but sentiment remains poor in the Eurozone region and the situation is fragile.

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