Latest CFTC Release Dated November 14th, 2006:
Dollar Implied Positioning Improves but Remains Bearish
CAD Positioning Deteriorates
US Dollar Index: Implied positioning remained negative for the third consecutive week, which is dollar bearish. As the chart above shows, price tends to follow positioning and vice versa. Turning points occur at extreme levels of bullishness or bearishness. With the recent range, it appears that the market is looking for direction. The flip to short implied positioning two weeks ago favors the downside (in the USD).
EUR: Sentiment is little changed this week. Speculative net positioning declined slightly from 68,925 last week to 60,475 this week. We index the data to compare sepcualtive positioning on a relative basis by calculating the percentile that speculative positioning falls into when compared to the last 52 weeks. Sentiment remains bullish as this weeks value is at 63. Readings above 50 are considered bullish.
GBP: British Pound Sterling net longs decreased this past week but remains extreme. GBP net longs are at 62,252 this week, down from 84,280 the week prior. Net positioning is in the 96th percentile when measured against the last 52 weeks, which is considered extreme. We mentioned last week that the extreme readings can last for weeks but the risk of a reversal is now high. Price did reverse lower and the continued extreme readings give scope to additional weakness.
CHF: CHF net speculative positioning increased from -55,701 to -42,545 and the percentile indicator is now at 27 after being at 8 last week. While the speculative community remains net short of CHF, it is possible that the currency is bottoming out (USDCHF topping) as speculators may have started to cover CHF shorts.
JPY: Net positioning in the JPY improved marginally. Prior commentary stands - Speculators positioning increased from -137,290 to -59,600 for a change of 77,690. Net positioning is now in the 39th percentile when measured against the last 52 weeks. The move above the 25th percetile may signal a larger turn towards JPY strength.
CAD: CAD sentiment continues to deteriorate as speculative short positions nearly doubled (45,341 to 73,277). Net positioning decreased from -20,342 to -47375. Our index is at 0 and indicates that the market is extremely bearish on CAD. USDCAD bulls need to be careful here though as extreme readings can lead to reversals.
AUD: Speculators decreased longs for the first time in 6 weeks but the percentile reading remains extreme at 96. The recent extreme readings in AUD futures gives scope to a substantial decline in the currency. Notice that a major reversal occurred back in March of 2005 when net speculative positioning was at extreme levels (as now).
