Latest CFTC Release Dated March 20th , 2007:
Implied Dollar Positioning Decreases Significantly
The charts used to interpret the Commitment of Traders data now include both net positioning and the percentile indicator. The percentile indicator value is the current net positioning as a percentile when measured against the last 52 weeks. A 4 week moving average is applied to that number in order to smooth out the data. A reading above 90 indicates extreme bullishness and a reading below 0 extreme bearishness. Market turns occur at extreme levels of optimism and pessimism (bottoms at pessimism and tops at optimism). Therefore, readings below 10 on the percentile indicator give scope to bottom formation. Readings above 90 give scope to a topping formation.
US Dollar Index: Implied dollar positioning remains negative after flipping to negative last week. The increase in implied short positions indicates bearish sentiment towards the buck.
EUR: Euro net longs decreased the past week and positioning remains extremely bullish. The percentile indicator is turning over, indicating that the bull trend may be nearing an end. Commercial positions (not shown here) tell an interesting story. Commercials tend to be correct at market turns, owning large amounts of the currency at the bottom and small amounts at the top. Commercial longs are the lowest since 12/19 (the EURUSD then fell from 1.3245 to 1.2865 in two weeks time).
GBP: Long positioning more than doubled last week, indicating that the GBPUSD may make another run at the 2.0000 figure. However, the larger trend has been towards GBP selling, as evidenced by the declining percentile indicator. It is still possible that Cable may have peaked at 1.9915, which was the same week that net long positioning peaked.
CHF: CHF net speculative positioning has increased a good amount the past 3 weeks from extremely bearish levels. The percentile indicator has rallied above 10, indicating that the CHF may to outperform the other currencies.
JPY: Yen positioning has also continues to improve. The interpretation is the same as that of the CHF. Look for the JPY to also outperform (decreasing Yen crosses).
CAD: CAD positioning has improved from record short levels also. Net positioning increased from -74,139 to -51153, but this can be attributed to not only short covering, but also an increase in longs. With the percentile indicator increasing from extreme levels, look for a stronger CAD going forward.
AUD: Long positions increased for the second week in a row as the Aussie took out 2004 highs and traded to its highest level since 1996. With the percentile indicator decreasing from extreme levels, the next large move is likely to be lower.
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