Latest CFTC Release Dated February 13th , 2007:
Pound Positioning Nearly Cut In Half May Be Beginning of Pound Downtrend
Note: 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 increased last week. An increase in dollar buying along with bullish sentiemnt (percetile indicator above 90) favors strength.
EUR: Euro longs increased from 45,330 to 83,795 this past week. Still, the percentile indicator is below 50, which indicates bearish sentiment. The longer term trend remains towards euro selling.
GBP: Long positioning fell significantly from 92,728 (near record highs) to 48,598. Such a major drop in such a short amount of time may very well be the beginning of a longer term downtrend. The percemtile indicator is above 90 as well which makes conditions ripe for a major top.
CHF: CHF net speculative positioning continues to fall. The percentile indicator is below 10 but keep in mind that conditions can remain extreme for a while. Only an increase above 10 would favor CHF strength. The trend remains towards CHF selling. Due to CHF positioning reaching extremely bearish levels, the currency may rally against overbought currencies such as the Pound.
JPY: Yen positioning fell last week after improving for the first time in 8 weeks. Positioning is extreme (JPY bearish) as indicated by the percentile indicator, which remains at 0. Last week, we said that the decrease in short positioning at extreme bearish levels increases the probability of a reversal towards Yen strength (USDJPY weakness). This has happened but we need to see positioning continue to improve if JPY strength is to persist.
CAD: CAD positioning slipped again last week. We said last week that the improvement in sentiment the last three weeks could be the beginning of a bottoming in CAD sentiment and thus price (topping out in USDCAD). The reversal scenario holds more weight given the improvement in CAD positioning. Notice previous instances of the indicator turning up while below 10. This indicates that a major change in sentiment is taking place.
AUD: Positioning is little changed since last week. The percentile indicator continues to decrease from extreme readings. The topping scenario that we proposed in recent weeks remains.