US dollar: are traders preparing for a reversal?

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

For the sixth consecutive week, large speculators (NON-COMMERCIAL) have decreased their net buying position on the dollar index by 0.5 thousand contracts, bringing it down to 2.6 thousand. This is the lowest net position since the start of July 2021.

Hedgers (COMMERCIAL) decreased their net sell position on dollar index contracts by 0.9k contracts to 2.7k. This marks the sixth consecutive week that hedger operators have reduced their net sell position.

The open interest decreased from 31.4 thousand to 28.9 thousand, a decrease of 2.5 thousand contracts.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators decreased by 0.02 over the week, bringing it to 1.18.

The Commitment of Traders (COT) report data on the dollar index (USDX) has revealed a growing bearish sentiment towards the US currency. Over the past month, traders have been reducing their net position on the dollar, with the net position reaching its lowest level in the last 25 months. In the last week alone, large funds have decreased their purchases of the dollar by 7%. If this trend continues, it could lead to a further decline in the value of the US currency.

Last week, traders decreased their positions in the USD, leading to a noticeable decrease in the rate of net position contraction. This could be an indication of a potential reversal.

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.