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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 67, indicating that plenty more selling is possible. However, the 13 week index is at 0, which warns of a bearish sentiment extreme and potential turn. Conditions remain bearish but the USD is probably a few weeks at most from a significant bottom. Watch for signs of a reversal.
[B]Signal: [/B]Bearish but forming a bottom
[B]EUR: [/B]Interestingly, positioning regarding the Euro does not mirror that of the USD. The 52 wek and 13 week indexes are at 10 and 42, which suggests that the Euro could continue to gain for weeks, but not necessarily against the dollar. We wrote last week to “look for longs in the EUR / commodity crosses.” These trades should continue to work.
[B]Signal: [/B]Bullish
[B]GBP[/B]: At 92, the 13 week index is nearing the bullish extreme point of 100. Probability of a major turn has increased, especially against the USD.
[B]Signal: [/B]Bullish but topping
[B]CHF:[/B] The 52 and 13 week COT indexes are at 57 and 17 and trending down. This indicates a lack of demand for CHF. However, neither the 52 or 13 week indexes are near a bullish or bearish extreme, so the reading is neutral.
[B]Signal: [/B]Neutral
[B]JPY: [/B] The 52 and 13 week COT indexes are at 92 and 67, indicating that a bullish exrtreme has been reached. The JPY should put In a high that lasts at least a few weeks soon.
[B]Signal: [/B]Bearish
[B]CAD: [/B]The 52 and 13 week COT indexes are at 43 and 83. The 13 week index warns of a bullish extreme indicating that the CAD could decline going forward.
[B]Signal: [/B]Bearish
[B]AUD:[/B] The 52 and 13 week COT indexes are at 47 and 83. The 52 week index suggests that the Aussie could continue gaining while the 13 week index is suggestive of a top. Until things clear up, the signal is neutral.
[B]Signal: [/B]Neutral
[B]NZD:[/B] The 52 and 13 week COT indexes are at 29 and 25. The COT data does not indicate a bullish or bearish extreme therefore the signal is neutral.
[B]Signal: [/B]Neutral