US dollar: traders react to DXY's 5-week rise

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

Non-commercial large speculators increased their net buying position on the dollar index by 2.4 thousand contracts, bringing it up to 5 thousand. This was a reversal of the 6-week contraction that had been occurring, and the net position is now at its highest level since the beginning of July 2021.

Hedger operators saw a 3.4k contract increase in their net sell position on dollar index contracts, bringing it up to 6k after a 6-week decline.

The open interest decreased by 2,000, bringing the total to 27,000 contracts.

The ratio of the number of buy contracts to the number of sell contracts for the bullish index of large speculators increased by 0.16 to 1.34 over the week.

The Commitment of Traders (COT) report data on the US Dollar Index (USDX) shows that bullish sentiment on the US currency is increasing. After a significant 6-week drop, traders have started to build up their net position on the rising dollar. This is a notable change from the minimal net position seen over the past two years. The 5-week rise of the DXY has finally been noticed by traders, with large speculators increasing their dollar purchases by 14% in the last week. If this trend continues, it could lead to further growth 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 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.