Latest CFTC Release Dated March 27th , 2007:
Yen and CHF Positioning Continue to Improve as Dollar Positioning Deteriorates
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. We have also added longs as a percentage of speculative positioning. Readings above 90 and below 10 are considered extreme.
US Dollar Index: Implied dollar positioning continues to deteriorate. Implied positioning is now the most negative since mid-December and remains well below its 12 week average. Sentiment remains bearish.
EUR: Euro net longs increased last week and remains above its 12 week average. The percentile indicator is above 90%, indicating extreme bullish sentiment and the possibility of a top and reversal.
GBP: Positioning was little changed last week and remains below its 12 week average. The percentile indicator continues to decline and is now below 50%. It is possible that Cable may have peaked at 1.9915, which was the same week that net long positioning peaked.
CHF: CHF net speculative positioning continues to improve and is well above its 12 week average. The percentile indicator has increased above 50 and the percentage of longs has increased from below 10% to nearly 40% since late February. Sentiment has undoubtedly improved, suggesting that the CHF could outperform other currencies going forward.
JPY: Yen positioning also continues to improve and remains well above its 12 week average. The outlook is the same as that for the CHF.
CAD: CAD positioning has improved from record short levels reached in early January. Net positioning has increased from -84,906 to -31,982 in that time. Positioning remains above the 12 week average, which is CAD bullish.
AUD: Long positions increased for the third week in a row and above the 12 week average. Longs make up 92% of speculative positions now, indicating that this market is one sided. Markets can remain illogical for longer than you can remain solvent (Keynes) and positioning has been extreme since July 2006. Sentiment remains bullish but the risk of a top and reversal is high (similar to the EUR).