US Dollar: Are Traders Forming a Reversal?

The Commodity Futures Trading Commission (CFTC) COT (Commitments of Traders) reports for the week ending on Tuesday last week showed:

Non-commercial large speculators decreased their net buying position on the dollar index by 0.7k contracts, bringing it down to 15k. This follows a period of five out of the last six weeks where they had been steadily increasing their net position, which had reached its highest level since January 31.

Hedgers (COMMERCIAL) decreased their net sell position on dollar index contracts by 0.8k contracts to 16.6k. After 4 of the last 6 weeks of growth, hedger operators decreased their net sell position.

The open interest decreased by 1,100 contracts, bringing the total to 2,600.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators increased by 0.03 to 3.41 this week, likely due to a decrease in sales.

The Commitment of Traders (COT) report data on the dollar index (USDX) has revealed a growing bearish sentiment towards the US currency. After a month-long period of growth, traders have started to reduce their net position on the dollar, with the net position declining from its maximum levels over the past 5 months. Major funds have cut their dollar purchases by 5% in the last week. If this trend continues, it could lead to a decrease in the value of the US currency.

It is advisable to wait for the data of the next report, which will be released in a week, to affirm the reversal of the net position.

COT report data is essential for medium and long-term trading, and is mainly used by large speculators, NON-COMMERCIAL (banks, investment funds). These traders usually follow the trend (blue line). Small speculators, NONREPORTABLE POSITIONS, however, have little impact on the market (red line). Hedgers, COMMERCIAL (operators, large companies) usually go against the trend (black line). The net position is the difference between the number of buy and sell contracts, while open interest is the total of all open positions in the market.