Saturday February 3, 2018 - 14:01:25 GMT
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Commitment Of Traders Report for 30 January 2018 Data Register To Test Your Amazing Trader
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 continue to hold well above the old 100K ceiling. This is a bullish EURUSD development, but poses risks on a price reversal. The heavy blue line (once a week spots) provides a useful perspective on the support coming from the price action. In the latest week the EURUSD held above psychological 1.2300 line and tested above 1.2500 again in the latest week.
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 remained heavy long USDJPY (short JPY) as of last Tuesday. JPY open interest usually tracks the USDJPY exchange rate, but has not in the past several weeks. There is a risk that a lot of JPY shorts could be unwound should USDJPY remain weak.
Traditionally USDJPY is heavily manipulated by the Bank of Japan. The BOJ typically wants to keep its currency depressed to promote exports. Expect covert BOJ USDJPY support. We have heard chatter of such activity in the latest week. Until recently, USDJPY has tended tend to correlate positively with the yield on the U.S. 10-yr note has achieved its target yield of above 2.80%.
Net GBPUSD long positions topped last Tuesday. The GBPUSD spot line (heavy blue) has been has been supporting the GBPUSD longs.
This GBPUSD pair is more sensitive than many to its domestic economic data. This characteristic makes it attractive to those of us who rely on active markets. We are also 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 it should always be watched by active traders.
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