The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over a specific number of weeks (either 52 or 13). A reading close to 0 suggests that a bottom is forming and a reading close to 100 suggests that a top is forming. The readings are for the actual currency, not the currency pair. For example, a reading of 100 on the Canadian Dollar suggests that the Canadian Dollar is close to a top (USDCAD close to a bottom).
Readings of 95 and higher as well as 5 and lower are in boldfaced red type to indicate potential market extremes. For example, an increasing index is bullish until the index is extreme (near 100), at which time the risk of a reversal or pause in the trend increases.
US Dollar
US Dollar Index: The 13 week index is at 0, which indicates a bearish sentiment extreme. Sentiment extremes occur near bottoms so expect a bottom and reversal in the USD.
Implications: bottoming
Euro
EUR: The 13 week index is at 100, which indicates a turn from a bullish sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping
British Pound
GBP: The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping / topped?
Australian Dollar
AUD: The 13 week index is at 100, which indicates a bullish sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping
New Zealand Dollar
NZD: The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping
Japanese Yen
JPY: The 13 week index is at 100, which indicates a bullish sentiment extreme (USDJPY bearish). Sentiment extremes can last for weeks and even months but the presence of one indicates that the risk is high of a Yen decline.
Implications: bullish extreme, risk of a top (USDJPY bottom)
Canadian Dollar
CAD: The 13 week index is at 100, indicating a bullish sentiment extreme. Sentiment extremes occur at turns so favor CAD weakness (USDCAD bullish).
Implications: bearish (USDCAD bullish)
Swiss Franc
CHF: The 13 week index has rolled over from 100, which indicates a turn from a sentiment extreme. Tops tend to occur in close proximity to readings of 100.
Implications: topping (USDCHF bottoming)
Jamie Saettele publishes Daily Technicals every weekday morning (930 am EST), COT analysis (published Monday mornings), technical analysis of currency crosses throughout the week (EUR on Tuesday, JPY on Wednesday, GBP on Thursday, AUD on Friday), and the DFX Trend Index every day after the NY close. He is also the author of Sentiment in the Forex Market.
Contact at jsaettele@dailyfx.com
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