Positioning on Yen futures remains extreme and suggests that the Yen crosses will rally near term. This would present a longer term sell opportunity.
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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 76, indicating that plenty more selling is possible. However, the 13 week index has bounced from 0, which introduces the possibility that sentiment towards the USD has turned from a bearish extreme. Watch for a reversal.
[B]Implications: [/B]forming a bottom
[B]EUR: [/B]The 52 wek and 13 week indexes are at 24 and 76. Similar to the USD (but inverse) the 52 week index suggests that the larger bullish trend could continue. However, a spike in the 13 week index from 33 to near 80 suggests that a top is close.
[B]Implications: [/B]forming a top
[B]GBP[/B]: The 13 week index has rolled over from 100, indicating that the next GBP bearish leg is underway. The GBP should accelerate lower in the coming weeks.
[B]Implications: [/B]Bearish
[B]CHF:[/B] The 52 and 13 week COT indexes are at 86 and 75 and rolling over. This indicates that the sentiment regarding the CHF is near a bullish extreme. The CHF is expected to underperform over the next few weeks.
[B]Implications: [/B]Bearish
[B]JPY: [/B] The 52 and 13 week COT indexes are at 98 and 92, indicating that a bullish exrtreme has been reached. A multi-week high for the JPY is probably in at USDJPY 95.72. Expect the JPY to fall across the board over the next few weeks (bullish for JPY crosses).
[B]Implications: [/B]Bearish
[B]CAD: [/B]The 52 and 13 week COT indexes are at 6 and 0. Readings this low warn of a bearish sentiment extreme. As such, the CAD may outperform over the next few weeks.
[B]Implications: [/B]Bullish
[B]AUD:[/B] The 52 and 13 week COT indexes are at 41 and 50. The 13 week index has rolled over from 100 and is trending down, which is bearish. The 52 week index has been near 50 since mid February. Until things clear up, we maintain a neutral reading
[B]Implications: [/B]Neutral
[B]NZD:[/B] The 52 and 13 week COT indexes are at 12 and 0. Similar to the CAD, readings this low are suggestive of a bearish sentiment extreme. Look for opportunities to but the NZD as it should outperform in the coming weeks.
[B]Implications: [/B]Bullish