Latest CFTC Release Dated November 28th, 2006:
Dollar Implied Positioning Extremely Bearish
Euro and Pound Positioning Extreme
US Dollar Index: Turning points occur at extreme levels of bullishness or bearishness. Implied positioning plummeted this past week to -153,835, which is in the 10th percentile when measured against the past 52 weeks. Implied positioning last declined to a level this low on May 9th. The dollar index bottomed that week as well. Increased commercial buying often indicates a bottoming out and commercial buying has increased to the 80th percentile when measured against the last 52 weeks. In June, commercial buying was at the 100th percentile. While another move lower may be needed to exhaust the recent move, it is likely that the dollar is nearing an important bottom (as suggested by COT data).
EUR: Euro speculative positioning increased significantly this past week from 65,306 to 89,594. Positioning is now in the 96th percentile when compared with the last 52 weeks, this is up from the 67th last week. A reading this high indicates extreme bullishness and brings to the forefront the possibility of a reversal in the euro. Market extremes can remain for quite some time, but the possibility of a reversal is something that should be considered.
GBP: Pound positioning was already extreme to the long side and positioning is now more extreme. As the chart above details, positioning is inching towards the all time high in net longs set 3 weeks ago. Commercial buying remains extremely low as well. The interpretation of the COT data is the same as that of the euro. That is, the market can remain extreme but reversal potential exists.
CHF: CHF net speculative positioning remains negative but has increased from -70,223 to -13,903 since 10/24, indicating that CHF sentiment has improved significantly. This bodes well for CHF bulls as positioning tends to move in trends.
JPY: Yen positioning is also improving significantly as speculators covered shorts this past week. Net positioning increased from -80,421 to -41,958?.or from the 16th to the 51st percentile. With Yen positoning increasing from depressed levels and euro and GBP positioning extreme, the possibility arises that Yen could outperform.
CAD: CAD data is little changed and remains extremely bearish with positioning is at the 4th percentile when measured over the last 52 weeks. Positioning has remained near depressed levels since mid October and the trend remains towards CAD selling.
AUD: Net positioning remains extremely bullish. In fact, positioning has remained extreme (bullish) for 8 weeks now. The recent extreme readings in AUD futures gives scope to a decline in the currency or pause in the uptrend. Notice that a major reversal occurred back in March of 2005 when net speculative positioning was at extreme levels (as now).
