US dollar: bears may not dare to break the "bottom"

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

For the second week in a row, and for 8 weeks out of the last 9, large speculators (NON-COMMERCIAL) have decreased their net position to purchase contracts on the dollar index by 1.8 thousand contracts, bringing it down to 2.8 thousand. This is close to the levels of August 8, which was the lowest since the start of July 2021.

Hedgers (COMMERCIAL) decreased their net sell position on dollar index contracts by 1.7 thousand contracts, bringing it down to 3.9 thousand. This marks the second consecutive week that Hedgers-operators have reduced their net sell position.

The open interest rose by 2.8 thousand contracts, bringing the total to 36.7 thousand.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators decreased by 0.10 over the week, bringing it to 1.14.

The Commitment of Traders (COT) report data on the dollar index (USDX) has revealed a rise in bearish sentiment towards the US currency. Over the past week, traders have increased their net short positions, pushing the net position of large speculators to levels not seen in two years. If this trend continues, it could lead to a decrease in the value of the dollar.

Traders may be hesitant to breach the lows of the current year's net position, providing bulls with an opportunity to initiate a reversal. This is further bolstered by the stark contrast between the futures market and the currency market, where DXY is close to 3-month highs.

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 influence 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.