COT data indicates that the US Dollar has additional downside potential
Latest CFTC Release Dated January 22, 2008:
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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]Explanation of Charts (in order from top to bottom):[/B]
[B]13 Week COT Index:[/B] see description just below the COT Index table
[B]US Dollar Index: [/B]The % of total commercial positions that are long measured through a 52 week percentile is at 12 and the % of total speculative positions that are long measured through a 52 week percentile is at 82. The 52 week COT index has rolled over from 100 and is at 84. Given that positioning has turned from a bullish extreme, expect the USD to decline.
[B]Signal: [/B]Bearish
[B]EUR: [/B]The % of total commercial positions that are long measured through a 52 week percentile is at 65 and the % of total speculative positions that are long measured through a 52 week percentile is at 12. The 52 and 13 week COT indexes have turned up from 0 (bearish extreme) and remain bullish.
[B]Signal: [/B]Bullish
[B]GBP[/B]: The % of total commercial positions that are long measured through a 52 week percentile is at 92 and the % of total speculative positions that are long measured through a 52 week percentile is at 4. Cable is at a bearish sentiment extreme and probably put in an important bottom last week.
[B]Signal: [/B]Bullish
[B]CHF:[/B] The % of total commercial positions that are long measured through a 52 week percentile is at 12 and the % of total speculative positions that are long measured through a 52 week percentile is 86. CHF buying has accelerated recently and a bullish extreme has yet to be registered so continue to favor CHF strength.
[B]Signal: [/B]Bullish
[B]JPY: [/B]The % of total commercial positions that are long measured through a 52 week percentile is at 8 and the % of total speculative positions that are long measured through a 52 week percentile is at 94. The 52 week COT index is also at 94, indicating that a bullish sentiment extreme has been registered. After reaching a bullish sentiment extreme, favor the downside.
[B]Signal: [/B]Bearish
[B]CAD: [/B]The % of total commercial positions that are long measured through a 52 week percentile is at 61 and the % of total speculative positions that are long measured through a 52 week percentile is at 27. The 52 week measure is trending down, indicating that the larger trend is down but the 13 week index is at 0, so be careful of a CAD rally near term.
[B]Signal: [/B]Bullish
[B]AUD:[/B] The % of total commercial positions that are long measured through a 52 week percentile is at 57 and the % of total speculative positions that are long measured through a 52 week percentile is at 14. The 52 and 13 week COT indices are at 24 and 50. All indicators have turned up from close to bearish extremes, so favor the upside.
[B]Signal: [/B]Bullish
[B]NZD:[/B] The % of total commercial positions that are long measured through a 52 week percentile is at 18 and the % of total speculative positions that are long measured through a 52 week percentile is at 59. The 52 and 13 week COT indices are at 53 and 83. COT information warrants a cautious bullish stance since the indicators are trending up.
[B]Signal: [/B]Bullish