COT Report Analysis - a thread on market sentiment

First of all: as Dstan said, I made a mistake in my second post of this thread! I cannot correct it anymore. Be aware please even if I do not always write, the percentages refer always to the percentage of the Non-commercial speculator segment as I mostly make my decisions based on their action.

So a bit earlier I evaluated the performance of the last week (two trades are doing great, one break even but actually is also ok because of positive rollover).

I looked at the COT report which was shortly published a couple of hours before and I make decisions based on the CURRENT Cot report. As I said earlier I try to update my trades always based on the current and newest Cot report (comes out always on Fridays).

[B]CAD/CHF long[/B]: I do believe that this trade is going to play out good. I have of course a stop loss as in all the trades but the actual Cot report suggests for me to [B]stay in the trade[/B]. CAD looks strong, CHF does not so the setup is still valid. More than that, even the negative Fundamentals for CAD could not give a gain for CHF so I believe in the strength of CAD.

[B]NZD/CAD short[/B]: well,[B] I will enter this setup[/B]. Until now it was theory but I also believe in this one. NZD fights to stay bullish, but the numbers tell me they lost the steam. Of course I might be wrong however a huge proportion of non-commercial traders are long and there are not too many left to buy!

[B]GBP/USD short[/B]: this trade was a theory only, though a winning theory! It will however do not come into practice as GBP does not give me a clear signal what to do. If I was in a trade, [B]I would liquidate now[/B]. So I just better stay away from this pair. In the long term I am still bearish, but I do not enter it without the signal!

These above mentioned trades have one disadvantage. If you like to diversify your trading you should not enter both of the trades I guess because CAD is involved in both of them which increases your risk if it goes the wrong direction. A possible solution might be as ForexUnlimited wrote to trade with smaller position sizes and it is then effective for risk control.

Tomorrow I will go more into detail for every single currency what the numbers tell and what is the theory behind. However it is quite late and I just wanted to update the three trades based on the new report.

So stay tuned and tomorrow/or on Sunday the new ideas are coming for the next week!

Now lets see what I found in the new COT report and which setups do I like for the upcoming week.

First of all I look at the currencies and then comes what I think about it! Important: the following percentile facts are based on the Non-Commercial sector of the COT report!

AUD: based on COT report there is no signal. All three segments are divided around 50% for longs and shorts. No clear trend.

GBP: now the GBP is very intersting. GBP was very bullish in the last year and it gained against the countercurrencies. Last week I though it “finally” started to go down and I also had a profitable trade idea. This weeks’ report however shows again increasing long % of traders (64.51%) but it is not an extreme so I will not trade it.

CAD: still the best long signal in my opinion. The COT report shows me it is not a bad idea to stay on the long side. Based on the report, long positions are 37% only and the CAD was reacting to the fundamentals strong during the past week. CAD has a long potential to grow!

EUR: obviously EUR lost a lot of its long positions in the last for weeks (from 58.63% down to 44.74%). The currency was a rollercoaster last week, although my bias is still short, there will be better opportunities to choose.

JPY: the Yen still looks very bearish (81.73% of non-commercial positions were short) and the currency value changes rapidly based on risk sentiment. These conflicts around the world do not make it easy to trade this currency currently. It is not yet on an extreme level however where I would go long with it. It is also important to keep in mind that the effects of tax rate high came out this past week with very weak fundamental news. Against such a storm of long positions I do not want to go.

CHF: the most interesting currency in this weeks’ report! There was a huge sentiment change between the positions! A week before 58.43% of non-commercial speculators were long, this week this proportion is only 42.82%! If you read my post from last week, you know I am in a trade against the Franc, but I have to watch out for the technical analysis to decide when to get out.

USD Index: well it is not listed in the COT report but “stole” the USD Index figure from cotbase.com. It is quite neutral, neither sell or buy signal.

NZD: if you read my last posts, you know that I am short on this currency. It has still some strength but I think it has to come to an end soon. The positive news and carrytrade keeps life in NZD but the big rally is over. 84.34% of non-commercial speculators are already long, there is not much possibility to go higher.

MXN: now you might ask “What the hell is the Mexican Peso doing in this analysis?”. I know exotic currencies are not in the headlines often but it is in the Cot report and actually I take a quick look always on MXN, BRL and on RUB. This time I thought MXN has deserved to be in the report as I see a potential in it! Although 84.61% of non-commercials are already long but there is a continuously growing open interest out there (157 626) which is a signal that there will be an action, possibly still MXN buying interest is out there. The figure from cotbase.com shows the pair is not an extreme level yet and MXN long positions are growing actually steadily. It might still be a good opportunity to go long on MXN, however with a tighter stop loss! The open interest can also mean a big downward movement is coming.

Conclusion:

Now we take a look at the summary! I do not find so many signals to trade as last week so I will stick to 3 trading opportunities:

NZD/CAD: short
CAD/CHF: long
USD/MXN: short

Probably your realized that two ideas come from last week. I am already involved with CAD/CHF and will enter NZD/CAD. The disadvantage of these trades are that they both involve the CAD which is not a great diversification.

The USD/MXN short idea is the only new idea and I have to keep watching this pair a bit before entering the trade. I never traded MXN so I would like to gain a bit experience and observe it. My bias is long for MXN with a tight stop loss and I can expect in some weeks maybe a bias change so I will be ready to change direction and go short with MXN. It is not easy to trade for me though since I have no Fundamental news on it like on other currencies and have to stick to the Technical analysis and COT report which makes it a bit more difficult. Anyway even if later on I will jump in, I do not expect such a long position possibilities like on the CAD pairs.

What do you think about these ideas? Do you make trades based on the COT report?

Regarding your USD/MXN short:
I like this for the most part. Just be aware:

  1. If you plan on holding for longer than a week, NFP is on Friday.
  2. The Peso has shown some some good strength off the 2/2014 highs- sellers have been pretty much in control for 3 months. On top of this, a supportive trendline was broken, retested and held as resistance heading into the close of April. Although there is some current support at the level the pair closed @ on Friday, I don’t think this level is going to hold.

Just looking @ price action from the swing high on the D1 on 4/28 forward: Sellers have been in control 60% of the time. The closes on the bearish candles have been @ / near the lows of the day. The closes on the bullish candles are primarily printed well off the highs of any intraday rally and attempt to bring prices higher.

Furthermore, a major red flag to me is how embedded the 14,3,3 STOCHASTICS indicator is- 17 days in oversold territory. This is a contrarian signal, i.e. potential further weakness ahead. Although there is some bullish momentum divergence on the H4, look how many times the indicator and price has diverged, yet continued to sell off.

Think about it- a major trendline (also a channel floor) which held for literally over a year was just recently broken to the downside, retested and held as new resistance. This is a significant event.

I guess it depends on your timeframe, and how long you plan to stay in the trade. If it’s longer term- pull up a weekly…There were 4 consecutive W1 PinBars printed. From the 1/2014 highs, sellers have been in control nearly 70% of the time. What does this communicate about the imbalance in the market between supply and demand (i.e. sellers and buyers)? 12.85 is clearly a very important price point for this pair. Given the current read on price action, I’d say that personally I’m neutral / bearish. But, that’s just my opinion.

Hi Forexunlimited!

Thanks for your comment! As I said I have never trade this pair, that is why I am looking at it now, however when I get a signal later, then I might get into it.

Looking at your analysis my bias is more bearish at the moment :slight_smile: I like a lot the trend line break and the channel. Also the candlesticks show the bearish bias.

And about the indicators and oscillators… Hmmm in the very beginning I took a look at them always until I read more and more books and had bad experience with them. Actually many of the great traders do not look at them at all and I also do not like them. Looking at historical data they look great but when you need it for a trade it is very often not useful. Especially Stochastic is also very used on this side but it does not show a valid sign however I am concerned about a trade I will definitely enter with or without the stochastic. Just like you say, price and indicator diverges so I better do not follow it.

It is also interesting that you mention NFP. Very true, on a weekly basis it has an effect on the outcome. However the price will rertrace after a while to the level where “it should be” so on long-term I do not think it has a serious effect. But as you said, if the trade is on for 1 week then it is crucial to end it Friday morning, because in the afternoon the result can be very different from the morning standing.

We will see how the pair moves and the end of next week we will be smarter!

What was your “bad experience” if you don’t mind me asking please?
Indicators don’t work for everyone, and it’s important to trade in a manner which is most natural to who you are as an individual.

Regarding the underlined statement above…What’s the difference between looking back @ historical price action (i.e. candlesticks) and utilizing mathematics to arrive @ a numerical representation of momentum (by looking back @ candlestick closes)? The Stochastics indy is a great tool (just a tool, not ever the primary reason to make a trade) to aide in interpreting where price is presently trading and how much momentum is behind a move in relation to a chosen range of x Weeks, Days, Hours, etc.

When the STOCH diverges from price, that could be an incredibly powerful symbol, and is one of my main strategies actually. So, I don’t agree with what you’re saying in regards to “price and indicator diverges so I better do not follow it”. You’d want to “follow it” 8 or 9 times out of 10, because it’s a great signal to enter the market in the right environment. Right now is just not the right environment because of the daily chart being pinned down. Sellers are just eating up buy orders.

Not sure how much NFP has an effect on a weekly basis (unless you’re mentioning the weekly chart?) The print only comes out once a month in case you weren’t aware of that. No worries though. Be careful making that assumption that “price will retrace after a while” because that is not completely accurate. Check out the image below- it’s a chart I made a few months back, showing how NFP impacted the USDJPY. Any number in Green is a better than expected release- any number in Red is a worse than expected release. Bottom line, my study shows that it’s not as easy as simply buying and holding the Dollar when NFP is good, and selling it when NFP is bad.


Link to image

Hi Forexunlimited,

Candlestick vs. Indicator: a candlestick can tell you a lot more than price action because you see basically the movement the the price during the time interval besides only taking into consideration of the closing and opening values. I think this is a very important information. About my experience: Stochastic and RSI are similar and often used everywhere. For a period of time a looked at both of them until a certain point when I realized they give often just the opposite signal! If one shows buy while the other shows sell then there has to be something wrong. But as you say it, if you can effectivel use it then great!

I think however that Stochastic can be useful in the USD/MXN trade for example as the pair is in the middle of the channel and if Stoc is right, it would make sense until price moves a bit higher and sell at the top of the channel.

Your table about NFP is great, good analysis. Yes it shows that reaction varies quite a lot. If I can suggest something: to measure the reactions better, I think it would make sense to plot these data on a clearly trending chart where the trend goes one direction and we can see the effects a bit better if the trend retraces or not. USD/JPY had huge swings which makes it more difficult to decide what is the effect of NFP and what is not. USD/CAD is also not perfect on the Daily chart but I think is still better to see the effect.

If you answer for this post, please do it on 301 Moved Permanently , it would be great. The thing is I would like to concentrate here on COT issues, the other post is basically “dead”, we can discuss there all other issues!

Hi ForExchange,

Hi ForExchange,
Sorry for my late answer, but I’m usually out for the weekend :slight_smile:
As I see you are look at the disaggregated cot report. Since it does not have such a long history (+ the too many categories messes you up a bit), I’d recommend that you analyze the classical cot report (some people may call it the legacy report). You can have a look at it here: CFTC Commitments of Traders Report - NYME (Futures Only)


Here I can explain, why the net values are negative or positive but at the same time if you add up all, you get 0. Just concentrate on the colored boxes. I used the colors the same as on the GBP chart I posted earlier --> Green: They are the non-commercials, but most people, who view the cot report regularly, simply call them: LARGE SPECULATORS (LS). Red: COMMERCIALS ©. Blue: Non-reportables, they are SMALL SPECULATORS (SS). The difference between LS and SS is the size with which they trade. Above a specific level, you need to report towards CFTC. Since these are pretty high levels, we can guess that these Traders are actually really LARGE players in the markets (like hedge funds…). SMALL speculators do not reach these levels, they are generally individual investors (like you and me:)).

If you calculate the net positions for these players, this is what you get:
LS: 507592-97384= they are long 410208 contracts.
C: 491241-920424= they are short 429183 contracts.
SS: 99092-80117= they are long 18975 contracts.
Adding these up (410208-429183+18975) you get 0.

I trade both, commodities AND currencies. I also trade OPTIONS on futures!! Yes, options. I think they are great instruments for long term trading. If you think about it, a cot extreme may exist for many weeks before prices react to the signal. Instead of taking large risks by using wide stops, it could be a solution to enter an option trade. There are two ways that may work (and now I am not go’na go into complicated options strategies – cause there are a few:) just two simple cases) 1) Buying: let’s say there is a huge, close to all time or maybe even all time cot extreme in a market, a bullish one. You know that prices will eventually bottom, but who knows, the decline may go on for a couple more weeks. In this case you can buy a CALL option with a strike price that you consider: it can be reached by price in a certain time (certain time: should be the expiry date of your option), I’d say 2-3 months to be sure. If prices do bottom out in let’s say 3 weeks , but then the rally erupts and you see prices rocketing towards your strike, during the 2-3 months of your option’s life time, prices may even go much further! Your Risk is fixed (the price you payed for the option) and your profit (in case you wait for the option to expire) is the intrinsic value (Spot price – Strike price) of your option. 2) Selling options: This is a riskier strategy, since theoretically you are taking unlimited risk… well there are hedging possibilities and of course you can use stops here as well, but I agree, you need to be more careful with selling options… Anyhow, just so you see the this strategy: to stick to our example… having this huge cot extreme in the market, you are pretty sure that prices will not go any deeper from where they are standing. You can start selling (I would say – because of the risk issue – OTM (out of the money)) PUTS, probably ones that will expire soon (a few weeks), but there could be option traders reading this who would argue that it is better to sell options with more time value… Your question may be: Ok, but what’s my reward: If prices start rallying as you predicted, your option will lose it’s value very fast. Since you sold the option, that’s good for you! :slight_smile:
I’m not saying that option trading IS the only way, but it is definitely an alternative that I think you should consider one day.

Yes, I am a subscriber, but it has a free part, where all cot charts can be seen yearly charts). I wouldn’t say it is costly service at all… if you think about it’s about two commission a month!! If you do trade regularly (and especially if you are a daytrader!!) Absolutely worth it!

All the best,
Dunstan

Hi Dunstan,

thanks for the answer. Actually I use the same report with same link as you do. But now I see which values you use. That was actually my problem because if you write “Light Sweet” or “Crude oil” in the search box with the link, then there are more light sweets or crude oil hits. I wasnt sure if I used the right one.

Your writing is interesting about options since I never traded options and it is good to look into it a bit. I will first master COT, have enough to do still and then I can will look after these futures :wink: However I think I will only look for opportunities to buy.

Have a grood trading week!

No problem, it was my pleasure! Just let me know if you have any questions.

I also wish you a great trading week!
All the best,
Dunstan

Hi everyone,

before looking at the new COT Report, lets take a look how the trades from last week worked:

[B]NZD/CAD short at 0.9200:[/B] -67 pips, stop loss activated at [B]-50 pips[/B]
USD/MXN short at 12.8525: stop loss would be activated
CAD/CHF long at 0.8245 (this week started at 0.8257): -87 pips from the beginning (this week: -75)

Well, we can say it was not my week. The CAD got a large hit and both CAD trades were going the wrong direction. With [B]NZD/CAD[/B] I had a tight stop loss and I am out.

[B]USD/MXN:[/B] it is hard to say how I would have finished this trade. As I mentioned earlier I do not know this pair, I was only watching the action and did not participate. I think though that the break of the channel (Forexunlimited wrote about the technical bias of this pair) would have activated the stop loss. Here is the question of MXN really weakens or it was only a breakout because the sentiment is still bullish for MXN with 84.31% non-commercial total long positions in the new COT Report.

[B]CHF/CAD:[/B] I have to rethink this pair the next week. The fact is that CAD is still bearish from the non-commercial point of view but the long positions for CHF also dropped which means the pair looks more balanced at this time. I will stay for at least 1 week in the trade.

Soon I post the findings of the new COT Report.

Take into consideration for last weeks’ action, that it was the first week of the month where key reports were published which always create a huge volatility in the market:

Now here are my findings for the following week:

AUD: although it does not look to be completely in an extreme position, 61.68% non-commercials are long, AUD had gained hundreds of pips since February and Fundamentals are not helping AUD either. I think latest in a couple of weeks, AUD will be turning to the downside. I will look at it closely to get in at the right time.

GBP: although the Pound gained again this week, 64.10% of non-commercials are already long, looking at the Cotbase.com graph and interpreting the news it looks like GBP is loosing its steam. Just like the AUD, it might not yet been in a turning point but it this will come soon to the downside!

CAD: as you might know, I am bullish on CAD and I am also in a long trade vs. the CHF. My bullish bias stays with CAD, maybe I should change the setup though and not trading against CHF but against another currency. Non-commercial net long positions are 37.05%, fundamentals were not great this week but I think CAD can rebalance and will gain some pips again.

EUR: people got quite negative on the EUR within 5 weeks of time. Of course it is logical as the currency lost almost 400 pips vs. USD. 38.78% of non-commercials are long and the interest rate cut does not help the currency either. I rather stay away from this currency. COT makes slowly a signal to buy, on the other side my fundamental bias is more to sell.

JPY: if I am getting really bullish on a pair, it is the JPY. Only 12.65% of the non-speculators are net long, so it is getting to a COT extreme. USD/JPY is in a tight range since half a year. On my opinion it is only a matter of time when JPY breaks out and get strength. And for this time I do not think that we have to wait long!

CHF: it looks a lot more balanced as last time. It is still not really bullish though, and as I said I will stay in my CHF short trade but might change it in a week.

USD: just like the last months, the USD is producing all kinds of mixed reports, quite balanced currency without clear directions. I do not see good trading opportunities tor the currency.

NZD: I would compare the NZD to GBP and to AUD. It has a long period of strengthening behind it and it looks like steam is lost and the downside starts. What is different to AUD and GBP though the NZD started already the downward movement in my opinion about a month ago. It retraces of course and still show strength however 82.14% net long positions of non-commercials show that there are not too many possibilities to grow and the decline will most likely come/is already in decline.

BRL: this week we have to travel to Brasil for an exotic currency setup. The BRL has a net long position of non-commercials of 75.07% and open interest raised about 20% this week. This shows that volatility and action is about to come!

Instead of giving tipps to exact currency pairs this week, I rather tell my medium- and long-term view on the different currency:

Bullish: CAD and JPY
Bearish: AUD, NZD and GBP.
Neutral (including currencies with slightly bullish and slightly bearish): USD, EUR and CHF.

I wish good luck to you all and I am interested about your opinion what your medium- to long term bias is on the currencies!

Hi everyone,

the new COT Report did not come out yet, but the values and conclusions from last week can be already analysed. I guess I can say that everything was going fine until the NZD rate hike and BOE Speech from Mr. Carney last night. Both of the were market mover, the question is how long.

On the long term I still have a bearish bias both on [B]GBP[/B] and [B]NZD[/B] however I have to say this week they gained against my expectations, mostly because of the mentioned fundamental reasons.

[B]AUD[/B] showed a mixed picture this week. Just like [B]CAD[/B], which was gaining nice against some of the currencies but was consolidating against the stronger currencies. I think it is a great indication that CAD is getting stronger in the long-term.

If someone is looking for a completely mix picture of a currency then the [B]JPY[/B] is the right choice. Gaining, losing and consolidating against its counterparts in the same week.

[B]EUR[/B] is mostly bearish as expected and [B]CHF[/B] is going down with it.

The [B]USD[/B] is not producing good reports and is losing the whole week against most of its counterparts.

Lets see what the new report brings to us tonight!

COT Report 13.06.2014.

Yesterday I wrote how I found the market action last week based on currencies movement. So, lets see what the COT Report tells us this week. Very important that the percentile factors will always show the non-commercial speculators:

AUD: 64.70% long shows that AUD is losing steam slowly. There were positive Chinese data out there this week, however AUD could only gain on weak currencies like the USD.

CAD: now the CAD looks more and more extreme as only 35.77% of the non-commercials are long on the pair. The strength of the CAD can be most seen that it was probably the only pair not losing much against NZD and GBP last week!

CHF: 43.19% of the people are long which is quite balanced. Charts tell us that CHF lost against most of its counterparts, this has a lot to do with weak EUR and that SNB would like to keep its rate steady with EUR, which means if EUR weakens, CHF weakens too!

GBP and NZD: GBP has 63.31% long and NZD has 85.19% long. There is a reason why I have both of these currencies together. I think in the long term they will both lose values as most of the traders are already long on these pairs, especially on NZD. Especially the NZD, which is almost in a COT extreme. It is important to say though that it might take some time still as both of the currencies got very bullish fundamentals the end of the week (rate hike for NZD and earlier rake hike possibility for GBP). And in this moment it is also very important to mention that the COT report shows the situation until Tuesday evening which is a 3 day relay to our current standing. And as both currencies gained a lot int he last days, we can assume that they are actually on a more COT extreme then what the report shows.

EUR: it is a tough situation with the EURO. The Fundamentals are clearly bearish for me and sentiment is also bearish with only 30.23% long from non-commercials. However exactly this 30.23% shows in the sentiment that very many people are already short and on cotbase.com it can be seen by EURO that the currency is already in an extreme short position.

JPY: if last week the currency was bullish, then it comes to an extrem position slowly with only 11.22% long positions! Against some currencies it is close to an extreme COT situation (AUD, NZD and GBP) while against some others it started already its journey to strengthening (USD, EUR, CAD and CHF).

USD: no clear tendency. It is ranging (CHF) against some of its counterparts, but gains (EUR) or loses (GBP) as well.

Open interest: there is a quite large open interest compared to last week for the following 3 currencies: GBP, JPY and AUD. This indicates that we have to have special attention for these currencies!

As I look into this report every week more in details, combining it with fundamentals and entering based on technical signals, it looks like a great strategy!

The CAD/CHF trade that I took earlier made a very nice movement this week so I will definitely stay in this trade.

So, the analysis of the COT Report comes from me only on Sunday or Monday, today I look how my forecasts of the currencies worked out from last week.

[I]The CAD/CHF trade is doing great and I will stay in it for a longer time.[/I]

[B]AUD[/B]: just like I thought, the AUD is weak, only gained vs the EUR and shows weakness.

[B]CAD[/B]: as you might know I am very bullish on CAD. This last week CAD gained on all of the majors, it had to do though a lot with the very positive report readings today.

[B]CHF[/B]: usually CHF does not get as much attention as this week. It had to do with the SNB statement and CHF gained vs the majors besides vs CAD. I was bearish on CHF and my bias stays bearish, but I will watch out to change my bias if needed.

[B]GBP[/B] and [B]NZD[/B]: I put these two currencies in one category last week and I do the same this week. GBP issued negative fundamentals this week, but two hawkish currencies like GBP and NZD should have shown a better weak than it did. As I wrote, I am bearish on the currencies and despite rate hikes, the currencies did not gain this week or they showed a very mixed picture. I think it is a confirmation that a trend reversal might come very soon. In case you are bullish on these currencies than in some pair there is a retracement now so it could be a good entry point for you.

[B]EUR[/B]: as my fundamental bias is short with EUR but COT gave more a bullish signal I stayed away trading this currency. Looking at the performance against the majors, the picture is quite mix and no real tendency could be observed. I am excited what the new COT report will show us!

[B]JPY[/B]: based on the COT report I got most disappointment from the JPY. It has been extreme bearish and a trend reversal is expected quite soon. JPY however either lost vs majors stayed in a range but did not gain against its counterparts. It has a lot to do with the bearish BOJ statement but still…

[B]USD[/B]: now for the Greenback I wrote that there is no clear tendency at all. This mixed bias stayed for the past week and we can make the conclusion as USD was either ranging or losing against other counter currencies. A clear tendency still cannot be seen. The FOMC statement did not sound like very optimistic though…

That’s it guys for the movement of the 8 major currencies for the past week. Altogether I am satisfied with the analysis; I did not get the right picture for JPY and have to pay more attention for CHF movements.

Have a nice weekend!

It is already Monday so it is important to see the COT report analysis from last Friday. Please do not forget that the percentile factors in the analysis mean the non-commercial large positions.

AUD: based on the COT report and on Cotbase.com the AUD looks quite weak, and shows a mixed picture among the majors. 64.20% are already long so I would either short the currency or stay away from it.

GBP: the pound showed a mixed picture and could not gain much even though the rate hike announcement. 67.73% are long so the reversal should come sometime soon.

CAD: I am still most bullish on CAD and it gives me good result against other major currencies. Still only 38.12% are bullish so there is plenty of space for improvement and strength. Interesting is that large speculators are still bearish while small speculators are very bullish on this pair. We do not see very often such a great difference between these two groups as at the moment.

EUR: based on the report the currency gained some strength since last week. Both large and small speculators are very bearish and it is on quite an extreme level based on the cotbase.com table which means we should buy the currency. However fundamentals are bearish so this mixed result makes this currency difficult to trade based on the market sentiment and fundamental reasons. On a long term I will still have a bearish view on this currency.

JPY: I am expecting the Yen for trend reversals every week as only 17.19% are long on the currency. The weak fundamentals do not let though the currency to gain strength. The currency is stuck in a range in most pairs; I am still more bullish than bearish on it.

CHF: the Swiss Franc had some gains last week and more than half of large speculators are long on it (56.50%). The currency still gives a mixed bias and as the Franc would like to have a relatively stable rate with the EUR and the EUR is weakening so CHF might be weakening in the long run too.

USD Index: USD lost against many currencies and it is not a surprise if we look at the fundamentals and speeches from the Fed. I also do not expect any difference in the upcoming weeks.

NZD: probably this currency is the most interesting this week. There is a huge sentiment change for NZD! A week before 85.19% was long and this week longs are only 54.71%. This is especially interesting because NZD has the highest interest rate and further rate hikes are expected.

Gold, Silver and Crude oil: as you might know, commodities are very dependent on geopolitical risk. As Iraq and Syria are basically in war, the price of gold and silver rose right away. As Iraq has a large oil production it affects the price of crude oil as well and as production has problems at the moment it helped to increase the price of oil. All 3 commodities were bullish last week and this might stay like this in such a geopolitical situation.

My current analysis shows the following results:

Bullish: CAD
Neutral or slightly bullish/bearish: CHF, USD, JPY
Bearish: AUD, NZD, GBP and EUR.

Let’s see what happens this week!

HI
thank you guys for the useful info.
Cheers

Hi ForExchange,
Thanks for very useful analysis, I am doing fundamental trading and also considering stronger/weaker economic factors to open positions.

The [B]GBP[/B] is still looking strong, I would expect it to move even higher, as long as the interest rate outlook is positive.

The [B]AUD[/B] may still hang that high for some time, especially after the recent China PMI. Commodities (including iron ore) are rising, and aussie will pick up at some point.

Good luck,
CxInvestor,
Funamental Trader

Hi Abdul and CxInvestor,

you are welcome, hopefully you can use the info in your analysis. You can also discuss your trading here, based on fundamentals or market sentiment.

What you about[B] GBP[/B] wrote, it is true, it is still looking strong. But watch out because lately it is not reacting so strong for positive news as before which means there is not so much steam in GBP. Make tight stop losses. In the long term besides the rate hike, I am bearish on it.

The [B]AUD[/B] looks a bit more complicated in my opinion. Do not forget when you are bullish that AUD economy is producing negative fundamentals lately. More than that looking at the Chinese economy, it is slowing down as well. And very true, there are some positive Chinese news out there, but the tendency shows something else.

I will post you guys some useful links in a couple of minutes when I find them.

Good Luck to you as well!

In case some of you do not have much experience about [I]Market Sentiment[/I], in the School of Pipsology there is a very good explanation at: What is Market Sentiment | Market Sentiment | Freshman Year | Undergraduate

Also on this site is the descrition about the [I]COT report[/I]. It also makes sense to read it Commitment of Traders Report | Market Sentiment | Freshman Year | Undergraduate .

Of course you can then widen your horizon and learn a lot more about it, but with these links you will have a quite good overview on what is going on with Market Sentiment and COT report.

Hi forexchange ,

First off thanks for bringing this up !

I have completely disregarded market sentiment up until I stumbled upon your thread.

I think it should play a crucial part in your analysis. As we retail traders only compromise so little las opposed to big institutions who actually move the market like hedge funds, banks and governments. It’s wise to know what you’re getting into prior placing a trade rather than basing off of pure technicals.

By that I mean you want to know which side they’re on. Or the market sentiment. It’s inevitable that fundamentals and market sentiment do affect the market. Though you may argue it’s pretty much laid out there on a chart. And anything that goes beyond just viewing charts like actually researching and analyzing furthermore might seem waste of time.

However, I think besides just trading with market sentiment you want to include fundamentals that drives the market sentiment and lastly technicals.

I think they should all have it’s part , and I think they do affect the market in one way or another.

:by the way I’m looking to short AUD/USD and NZD/USD

Market sentiment seems bearish on both of these pairs and as for fundamentals Aussie dollar is losing it’s heat (bullish force is slowly fading away) so I’m waiting for next resistance area for bearish confirmation and I’ll go in short. (I have gone short with Aussie dollar couple of times already and have made plenty of pips but it keeps pushing to the key resistance level @0,94 I believe who knows it might shoot higher later in the future. But market sentiment and fundamentals so far tells me to go short on this pair.

As for NZD market sentiment tells me to go short as well it is reaching a key resistance level soon so I’ll be eyeing for entry point to go short on this pair as well. However prior doing so I probably should look at the fundamentals.

Happy pipping ! :smiley: