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?