Speculators increased USD long positions (data through 6/17) and are most bullish the USD since the October 2006 top (EURUSD bottom).
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The COT Index is the percentile of the difference between net speculative positioning and net commercial positioning measured over the last 52 weeks. 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. The last 4 weeks of the COT Index are shown because it is just as important to know where the index is coming from. 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.
[B]US Dollar Index: [/B]The 52 week COT index is at 98 and the 13 week index is at 92. This is the highest that the 52 week index has been at since the November 2005 USD top. A reading this high tells us that the USD decline is not over yet. Expect USD weakness in the coming week(s).
[B]Implications: [/B]Bearish
[B]EUR: [/B]The 52 and 13 week indexes are at 10 and 42 after being at 2 and 8 two weeks ago. The indexes have turned from a bearish sentiment extreme, therefore the Euro is expected to advance.
[B]Implications: [/B]Bullish
[B]GBP[/B]: The 52 and 13 week indexes are at 2 and 8. Readings have held close to 0 for much of 2008 as the GBPUSD has traded sideways. With readings so low, probability is high that the next big move is higher.
[B]Implications: [/B]Bullish
[B]CHF:[/B] The 52 and 13 week readings are at 24 and 17. The 13 week index bounced from 0 in mid-may, triggering a CHF bullish (USDCHF bearish) bias. That bias remains in place.
[B]Implications: [/B]Bullish
[B]JPY: [/B] The 52 and 13 week COT indexes are at 29 and 0. The 13 week index has hit 0 5 times in the past 2 months, indicating that a turn towards JPY strength will be violent when it does happen. Of course, the Yen continues to weaken (sentiment extremes can last for weeks), so use caution when attempting to trade this reversal.
[B]Implications: [/B]Bullish but with caution
[B]CAD: [/B]The 25 and 50 week COT indexes are at 0 and 0. A bearish sentiment extreme is in place, indicating that a turn towards CAD strength is probable.
[B]Implications: [/B]Bearish but bottoming
[B]AUD:[/B] The 52 and 13 week COT indexes are at 31 and 0. The 13 week index at 0 is bullish for the AUD.
[B]Implications: [/B]Bullish
[B]NZD:[/B] The 52 and 13 week COT indexes are at 2 and 8 after being at 0 and 0 last week. We maintain our bullish stance.
[B]Implications: [/B]Bullish