COT Report Analysis - a thread on market sentiment

[ForExchange]

I see, all over the internet, that Bank Of America have warned their clients of a “squeeze risk” on USD (although they remain bullish in the med-long term).

Now they issued the warning last evening, so I’m guessing that they have been reading FE’s thread, if they had read the thread in the morning they may have issued their warning before the squeeze actually happened

FE, your analysis is excellent as usual, Credit Agricole are advising not to buy CHF “at current levels”.

Edit: Always share, I forgot

USD Correction Begins Vs JPY, CAD; AUD/USD Squeeze Risk - BofA Merrill

Hi Peter,

sometimes I wonder how many news sources you have which you click through every day. With the others, we usually post from the same 2-3 sites (depens on the person which site), but somehow you always post form different sites.

More then that, I think Pipcrawler gets his ideas also on our thread:
Short-term Long on USD/JPY | Forex Blog: Pick of the DayForex: Short-term Long on USD/JPY

Unlike rookie, Mike and myself, he does not want to bet the farm on it though

The article was interesting, it is another confirmation of our long-term bias.

Philip,
“This may not be what is happening exactly but its a nice way to simplify it.” - just love this sentence!

I hope your pattern will work out the way you wrote.

[MikeWolski]

Hey guys!

Thursday in the books.

AUD: +5 0 2
JPY: +4 0 3
CAD: +3 0 4
NZD: +3 -1 3
GBP: +3 -2 2
USD: +0 -5 2
CHF: +0 -5 2
EUR: +0 -5 2

Comms took out the Majors AGAIN. +10

So this week looks like this.
Monday: Majors +15
Tuesday: Comms +15
Wednesday: Comms +9
Thursday: Comms +10

Major vs. Comm

AUD: +4 -0 1
JPY: +0 -0 3
CAD: +3 -0 2
NZD: +3 -0 2
GBP: +0 -1 2
USD: +0 -3 0
CHF: +0 -3 0
EUR: +0 -3 0

Notes:
Comms down against no Major. And in total for the Comms only 1 down day NZD against AUD but by not much!
JPY was up against all other Majors. Strongest Major today. Even against all Comms.
GBP was next strongest Major, being up against USD, EUR, CHF.

Man guys…do you think that tomorrow will be a USD sell off? I’ve been thinking all this time so far this week that since the USD has been correcting so much that come Friday their gonna take names big time. Maybe I just don’t know much at all, but I’m surprised to here about the USD squeeze. (meaning going down right?)

It should be interesting.

Ok guys. Got to run.

We’ll talk.

Mike

[Nebula9]

[B]FE…[/B] It was probably a good thing that you closed all your USD longs. As long as it was floating above the surface - gains. You can always go back in to buy dollar at a better price. Since I’m already in with EURUSD stands currently at -16pips NZDUSD /just added one more position short during Asian session/ I have no choice but to hold it through. I’m not sure how far the squeeze will stretch. But I don’t feel that bad about keeping these trades. It really is different to have the bigger picture FE! What we’re seeing is a correction /and month end fix thing- i still haven’t figured out what that really is I will have to do more reading on that/ that we’ve been talking about Peterma has mentioned how CRB and Dollar index was rising just a week ago. You’re right about me closing trades too early FE! I need to work on that.

You can start reporting on Ukraine/Russia conflict already ;). I hope all your exotic pair trades turn out to be okay! Worst case scenario even it doesn’t. Its going to be a good experience. I’m sure you’ve had a lot to learn while trading these pairs. I’m all for learning from your mistakes. You’ll do better next time.

[B]Philip…[/B] Haha! Yes indeed I am. I have to watch out. Maybe I’m just being too cautious. Though I shouldn’t be. Sorry to hear about your USDCAD long hit. But you’re going in long again at a better price. I’ll look into USDCAD myself later next week if there’s an opportunity I’ll jump in. You hit the nail on the head about the reason behind JPYs strenght. Though it may not be whats exactly happening. I get what you mean. I was thinking I’m with EURUSD I admit my entry was bad I could have waited for some retracement. Still after positive GDP readings USD still couldn’t beat EUR down all the way to 1.3153 fibs 0 on 4h chart a level that I was hoping to take profit. Same thing for NZD. And I remembered your commercials report. You know what I’m going to say now :59: that commercials hold more than 50% on JPY, EUR and NZD. How many times have I repeated myself. Well my point was same thing could be said for EUR and NZD on top of month end fix thing.

[B]Mike…[/B] Hows your trades going. Any one of your limit orders got hit ? I read an article that Peterma posted earlier about the month end fix thing. August Month-End Model Points to Modest EURUSD Strength. US stock and bond markets generally strengthened over the course of the month, adding $151B in total market cap, whereas European markets generally trailed behind, shedding $197B in value. As a result, the model’s strongest signal is bullish on the EURUSD, though that signal still does not quite meet our +/- $400B threshold for a meaningful move. The other major currency pairs generally fail to exceed even +/- $200B change in relative market cap, so traditional fundamental and technical factors are likely to be the most important factors to watch heading into the weekend. I hope that gives you more clarity on squeeze thing.

If you’ve got any EURUSD short be prepared Mike! either setup a wide SL or close. I’m thinking which way should I go about my EURUSD short. Any suggestion guys ?

Update: I closed my EURUSD at -15 pips. My entry was bad. And I’ve reached a conclusion /it was rather a quick decision/ to close. It wasn’t worth keeping it going. Even if it did hit take profit which is very unlikely to happen in next few days given month end fix, dollar correction it wasn’t much the profit. I’ll get back in at a better price. My NZDUSD long two lots are still running.

See you around guys…!

[ForExchange]

Hi guys,

just wanted to say at London open that the USD pairs are reacting as Peter forecasted. We do see weakness in most pairs, others are consolidating like the CAD and JPY (I suggest they are already in overbought conditions and might not have to power at this moment to get further strength). We will what comes, but if everything goes like the plan then I will be ready to pull the trigger in the afternoon session.

Good luck to everyone

[MikeWolski]

Hey Rookie! Good morning buddy. …Ok, evening.

Yeah yesterday my EUR/USD took, and I got the take profit. +20 pips.
My AUD/USD took, but am still in, right now I’m at -14 pips running. I’m gonna hold onto that today.
One more took and am still in, USD/CHF. It’s at -7 pips now. I’m gonna hold onto that one also today.
So after I ran the numbers and reported last night before I went to bed, I was a able to see all the data come out for JPY. Not so good. Therefore I went in with USD/JPY. And now it stands at +12 pips. I’m gonna stay with that one today. But I have to put in some profits before I leave for work (in 2 hrs from now).

Yep Rookie, today’s gonna be interesting. I have a feeling the USD will be the choice of pick today. It just all seems like a set up. Know what I mean? The table is set for a pile on with the USD.

I really don’t know, nor am I anybody, but that is just my thinking. I will remember what happens though.

Oh, let me show you the US dollar index.

That’s 1hr time frame from the start.
It came back up to the 82.50 level, which is major.
It all will make sense to me if they rock the market today. If not, then I will humbly adjust my thinking.

Mike

[MikeWolski]

Hey FE!

You awake? :18:

So, tell me, what do you think? The USD doesn’t have the strength to go high today?
As I wrote my post just now I see you come on with something different.
If I’m missing something, let me know.

Mike

[Nebula9]

Yes Mike if USD is to gain strength it could be after London close.

As regards to month end fix thing the only pair we better watch out for is bullish EURUSD.

Squeeze on with AUDUSD and USDJPY I’m not quite sure. I’ll take it as a correction to simplify. JPY was resilient despite poor data against USD. So the correction might still be ongoing through US session until early next week. We’ll see.

[Nebula9]

Dollar index just broke resistance ?

USD might be up to something at the end of London an opening of US session. I’m also ready to place more long dollar orders.

[MikeWolski]

Man do I want to see some bad news for EUR, CPI coming out like in 2 minutes.
Waiting for a scalp here.

[MikeWolski]

No trades. No harm done. (scalping EUR)

Good luck everyone!

Come on USD.

Mike

[Nebula9]

I see USDJPY climbing up on 4h chart. I’m thinking if I should go long now.

However rising tension in Ukraine and Russia, resilient yen against dollar despite door data. I’m not sure.

I feel you Mike. It’s about time. But we never know. Even price action seems to be less reliable in these times where things are very choppy.

[ForExchange]

Hi Mike,

Yes, I wait a bit and look forward to go with the USD if my entries get triggered. If not, then I guess it is ok and I look later for good setups. If we are not int he market also nothing can actually go wrong.

I like the following setups on the daily chart:

[I]NZD/USD short on the 0.8400 resistance
USD/CAD long on the 1.0850 level because it is unable to break the 38.2 Fib.[/I]

EUR is always a candidate but as it never bounced, it is harder to find the right entry. All other pairs might be good too, but I like the mentioned setups. They give me confirmation on the technical levels. But there is some news out there too.

I think actually we are doing the same trades. I wait a bit and if the setup is good I enter them. USD got weak this week so I think the correction is made. Of course hoping at the same time that it is the end of it. For this did I look for the above pairs with technical confirmation.

I also took a bit time to analyse our AUD/USD short trade. My findings shows that it was not good to enter. They are the two strongest and actually on the daily TF trading in a range. Not a good setup after all. I do not close it as I think it will go back down to the range support but I don’t like it anymore. If it breaks out from the range we could take better advantage of it. I mostly would expect that to the down side. Sometimes I lose and think it was good to take the trade. I do believe that here I will get some small win but it was still bad to take it.

The only thing I find not so good by you Mike, that you change your mind very often. Looking at your trades I feel comfortable. But I do not know why you write “I am going to hold onto that one today” or “I will put in some profits before going to work”. I mean who knows what happens then? If you have a good reason to it ok, but I think you sometimes do decide too fast that a trade is losing and if it is winning you just take the first moment to take any profit. I read in several books that it is normal that trades are going against us in the beginning. It is hard to get in at the very best price. So some patience is needed.

I especially like you USD/JPY setup, I usually sleep in the Asian session so I could not react on the news right after their issue.

BT I cannot post thought my answer as you and rookie are keep posting new stuff

I do not know what you mean that I come up with “something different”, as I wrote above I think we wait for the same thing to happen (USD strength). I like rookies post, number 687 and agree with all the things. Read it!

This time I post the answers separate because they are quite long and going precisely to one person always:-)

[ForExchange]

Hi rookie,

good to know you are on my side with the exotic pairs!  Well, yeah it is really something to learn about it. The next time I wait longer in such case and try to be more patient. I still think they gave a great opportunity because they lose a lot of value by risk off sentiment (especially if the neighboring country is in war) and there will be a huge strengthening when it is over. If entered at the right time this can give a huge advantage and hundreds of fast pips. I know it also has a risk (like now) but I was unexperienced in this situation. As you wrote once: we do our analysis sometimes for 20-30 pips. Yes, but summer was slow, mostly ranging trading, except EUR weakness and lately USD strength and NZD and GBP weakness. Altogether little movements out there, mostly ranges but a great time to learn and widen our knowledge. Now when you put some exotic pairs in such low liquidity environment, with a good placed trade you can earn probably more with one rally than all other majors and comms trades altogether. As I said, more experience is needed but there is also a high reward out there.

I do not know if I can help your trades but I tell what I think. My question is why you exactly closed the EUR/USD trade? If it is because it was before the EUR CPI report, then I think it is ok. If it because you were in -15 pips, then it is not an explanation for me because -15 pips can happen in no time without any reason. If you say it is not going anywhere, usually that best is to close. In the current market situation I would have not closed it though because you took a loss, even if the trade would have most likely worked out in the long-term. Now the last question and a very important one is what only you can answer: your equity and risk. If you cannot afford to open a new position, then closing it and having the plan to get better at a better price is the right idea I think. However if you have free margin according to your strategy then closing it might be also a risk as we never know if the better price really comes. We expect it to come, but do not know. In this very moment the first reaction is positive on EUR for the news, but we did not know this earlier. And as I see I am already late to jump in as the price turned vs. EUR already.

About the NZD/USD long: hmm I do not have many information on this one as I do not know when and why you entered the trade. Why are you long and for what TF? If it is a short-term trade, then ok. I still do not like to go against my bias. I do believe you can get some pips in the short-term but I do not your exact plans with it. I actually feel very uncomfortable with this trade so I do not want to suggest anything or influence you at all.

Good luck to everyone!

EDIT: I saw what you wrote rookie about USD/JPY. I agree. I do think it is risk off sentiment for JPY and it is hard to beat know even though the bad data. If risk on will be back, maybe there will be a double effect vs. the JPY. It will weaken because of risk on and because of the bad news now. I do not think it can hold on to the recent levels very long. Even if it does fight very hard like in these moments

[peterma]

LOL, just thinking of a little rhyme.

Patience is a virtue,
Catch it if you can.

It’s often in a woman,
But seldom in a man.

(my wife taught me that one)

[ForExchange]

As of my writing posted Forex Gump a nice article on the Japanese economy:

3 Reasons Why the BOJ Might Ease Again | Forex Blog: Piponomics3 Reasons Why the BOJ Might Ease Again - BabyPips.com

I am still on the sideline with JPY but slowly the picture gets clear again.

[Nebula9]

Thank for sharing the link FE!

I meant to say NZDUSD short not long. It must have been an error. So far looks good. Nevertheless I’ll keep it for a while and I’m fact I might add more.

As for EURUSD short my entry was pretty bad. I went in even before I retracement started don’t ask me why. I must have been thinking something else. So it really wasn’t worth keeping it. Thought I’d close. Especially after bullish EURUSD squeeze thing. It was floating around with a loss of -40pips earlier but I closed it at -15pips. For some reason I thought I had to close right then and there before London opens. You know they like move a lot during their session. I was taking precaution.

[PhilipPirrip]

I like FE’s trade setups, although I’m a little greedy and would like to take the trades at higher levels. Having said that I’m expecting a worse than expected Canadian GDP reading.
EDIT: well I was wrong about GDP. There are things to note though: US personal income and spending is below expected. This would highlight fears of the FED of slack in the market. The quality of the jobs created is not good enough.
USDCAD went down and tested the level FE likes and held.

[peterma]

Well there you go, fix out of the way, all now hopefully back to normal.

I am being forced to move away from GBP/USD, simply because I do not want to short it, but I wouldn’t mind being long on USD.

The two that I like are USD/JPY and USD/CAD - I know re the US hol on Mon, but that doesn’t worry me too much, let’s see what happens.

[ForExchange]

Well there you go, fix out of the way, all now hopefully back to normal.

I am being forced to move away from GBP/USD, simply because I do not want to short it, but I wouldn’t mind being long on USD.

The two that I like are USD/JPY and USD/CAD - I know re the US hol on Mon, but that doesn’t worry me too much, let’s see what happens.

Hi Peter,

awesome! Just like you said it. London is done and the movement happened. Is it like this everyone month?

I thought for a moment that we should make you a golden crown with the others for a couple of thousands of $$$ but you are always against the comments when we say you are great so I thought we should just leave the reward again:-)

I do not know why you are not a Forex Hedge Fund Manager somewhere out there. Actually it is good that you are not one because you would take the $$$ of nice people like Mike, rookie, Philip or myself.

So, on the currencies: I do like the movements, only CAD hesitates. I entered earlier NZD, and now CAD, I missed the opportunity on GBP, now I wait that it hopefully goes back to 1.6595.

Good luck for the last hours.

[ForExchange]

Hi guys,

I am waiting your opinion in two trade issues:

Philip for sure can say something about the first, as he is my CHF adviser. Huck made here a point, and makes me to think about going against CHF with more currencies next week. Read the article and the fundmental reasons:

Forex Setup: Retracement Play on USD/CHF | Forex Blog: The Loonie Adventures of a Forex NoobForex Setup: Retracement Play on USD/CHF - BabyPips.com

The other is about Mike’s table. I never entered or exited a trade based on the table but it is good for confirmation. This is the third week the Comms are winning so they probably reached their limit (3 winning series). Technically I should leave open my EUR/AUD and AUD/CHF trades but Mikes table is in my head. As I see both currencies so weak, I think I will leave them open and be ready to adjust if needed. The AUD/NZD and AUD/CAD remains open. I would like to hear what the team says about the two issues.

FE