Saturday February 24, 2018 - 12:01:48 GMT
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Commitment Of Traders Report for 20 February 2018 Data
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Forex trading is all about stops. The Commitment of Traders Report (COT) can be an imperfect, but often 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 are in large or small. Where and how large the stops may be is critical trading intelligence. The data we monitor are the positioning of large traders who usually are thought of as the "smart money". These data usually may not correlate well with the the various retail trader statistics. Each set of data tells you different things about potential stops.
EURUSD net long positions continued to hold above the old 100K ceiling as of Tuesday's close. Odds are they will have been trimmed significantly since then. The EUR turned soft in the lattr half of the week just ending. The heavy blue line (once a week spots) provides a useful perspective on the support (or lack thereof coming from the price action.
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. Keep in mind that the JPY plays a special role as the financing currency for many long imvestment positions. The JPY is definitely being bought modestly whenever equity longs are unwond.
Net GBPUSD long positions have contnued to be unwound.The current market seems to revolve around the EURGBP cross.
This GBP pairs are 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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