Saturday January 6, 2018 - 13:03:32 GMT
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Commitment Of Traders Report for 2 January 2017 Data
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Forex trading is all about stops. The Commitment of Traders Report (COT) is an imperfect, but useful, "sampling" of market positioning. I would prefer more frequent and precise readings, but we have to live with what we get. The data work for the purpose of getting an idea if traders are positioned long or short and if they in big or small. Where and how large the stops may be is critical trading intelligence.
EURUSD net long positions shot well above the old 100K ceiling in a holiday shotened week. This is a very bullish EURUSD development. The heavy blue line (once a week spots) provides a useful perspective on the price action. In the latest week closedsolidly above the psychological 1.2000 line.
As the developing alternative reserve currency twin to the USD, keep in mind EUR positions are not just against the USD. EUR crosses vs. the JPY and GBP are critical. The European economy continues to improve and that should remain a EUR positive.
The market remains long USDJPY (short JPY). JPY open interest tends to track the USDJPY exchange rate closely. Odds are tat there may be a lot of selling of JPY vs. EUR underway usinng yje JPY as the funding currency for EUR longs.
The USDJPY has always been heavily manipulated by the Bank of Japan. The BOJ typically tries to keep the currency depressed to promote exports. Whenever the USDJPY starts to slide, expect to encounter covert BOJ USDJPY support. The USDJPY tends to correlate positively with the yield on the U.S. 10-yr note which appears to be targeting a yield of 2.50%.
Net GBPUSD positions flipped long ten weeks ago, then turned square, and now are modestly net long. The GBPUSD spot line (heavy blue) has been clmbing with EURUSD, and has been supporting GBPUSD longs.
This GBPUSD pair is more sensitive than most to local economic data. This characteristic makes it more attractive to those of us who rely on active markets. We are always keeping a close eye on the EURGBP cross as a barometer of flows in and out of the EUR. These flows often directly impact both units against the USD so should always be watched by active traders.
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