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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 dropped to 69, which does not tell us much. However, the 13 week index has bounced 0 to 83 over the last month (now back to 42), which introduces the possibility that sentiment towards the USD has turned from a bearish extreme and that the USD will rally further from its low. The composite COT has been increasing over the last few months, which is USD bullish.
[B]Implications: [/B]Bullish
[B]EUR: [/B]The 52 and 13 week indexes are at 6 and 25. Similar to the USD (but inverse) the 52 week index suggests that the larger bullish trend will eventually continue. However, the 13 week index has rolled over and fallen to 25. The composite COT is declining (not a surprise since the USD composite COT is increasing), which favors Euro weakness over the next few weeks and maybe months.
[B]Implications: [/B]Bearish
[B]GBP[/B]: Last week, both the 52 and 13 week indexes were at 0; indicating a bearish extreme. This week, the readings shot up to 22 and 58 and the composite COT increased from -43,323 to 2,918. Positioning increasing from a bearish extreme is GBP bullish.
[B]Implications: [/B]Bullish
[B]CHF:[/B] The readings are at 59 and 25 for the 52 and 13 week indexes. Neither index indicates potential for a bullish or bearish extreme, therefore implications are neither bullish or bearish.
[B]Implications: [/B]Neutral
[B]JPY: [/B] The 52 and 13 week COT indexes are at 61 and 0 now. The 13 week index at 0 indicates a bearish extreme. Therefore, it is time to begin looking for opportunities to buy Yen again (sell Yen crosses).
[B]Implications: [/B]Bullish
[B]CAD: [/B]The 25 and 50 week COT indexes are at 4 and 17. Neither index indicates potential for a bullish or bearish extreme, therefore implications are neither bullish or bearish.
[B]Implications: [/B]Neutral
[B]AUD:[/B] The 52 and 13 week COT indexes are at 78 and 92. The 13 week index was at 100 three weeks ago, which warns of a bullish extreme. Often times, the uptrend will continue for a few weeks before the reversal in price occurs following an extreme reading. In other words, watch for a top (possibly already in place).
[B]Implications: [/B]Bearish
[B]NZD:[/B] The 52 and 13 week COT indexes are at 12 and 17 after being at 4 and 0. Readings this low are suggestive of a bearish sentiment extreme and reversal opportunity. However, this could also be the beginning of a larger bear trend. In such instances, COT data will indicate an initial bearish extreme before the big decline begins…so be careful.
[B]Implications: [/B]Bullish (but see above)