Positions of large speculators according to the COT report as at 23/7/2021

Total net speculator positions in the USD index rose by 900 contracts last week. This change is the result of a 1,300 contract increase in long positions and a 400 contract increase in short positions.

The increase in total net speculator positions occurred last week in the Swiss franc and the Japanese yen.

The decrease in total net positions occurred in the euro, the Australian dollar, the New Zealand dollar, the Canadian dollar, and the British pound.

Equity indices erased early week losses in the second half of last week and the SP 500 made a new all-time high. So from this perspective, we have risk-on sentiment back, which should be particularly supportive for commodity currencies.

However, the Fed will meet on Wednesday where signals regarding future interest rate hikes will be watched very closely. If a faster than expected rate hike is signalled, this could be negative news for the indices and along with this the AUD, the NZD and the EUR could weaken.

 

The positions of speculators in individual currencies

The total net positions of large speculators are shown in Table 1: If the value is positive then the large speculators are net long. If the value is negative, the large speculators are net short.

 

	23/7/2021	16/7/2021	9/7/2021	2/7/2021	25/6/2021	21/6/2021
USD index	12,200	11,300	7,600	-400	-500	-2,300
EUR	45,800	59,700	77,200	87,200	89,100	118,200
GBP	-3,500	8,000	21,900	17,700	17,900	32,200
AUD	-35,700	-28,800	-24,900	-17,800	-17,600	-17,900
NZD	3,000	3,200	1,800	3,100	3,300	3,300
CAD	12,900	26,400	41,200	45,800	43,200	44,300
CHF	8,000	7,100	10,200	11,100	13,600	9,400
JPY	-55,700	-56,300	-69,100	-69,900	-53,900	-46,900

_{Table 1: Total net positions of large speculators}

 

Notes:

Large speculators are traders who trade large volumes of futures contracts, which, if the set limits are met, must be reported to the Commodity Futures Trading Commission. Typically, this includes traders such as funds or large banks. These traders mostly focus on trading long-term trends and their goal is to make money on speculation with the instrument.

The total net positions of large speculators are the difference between the number of long contracts and the number of short contracts of large speculators. Positive value shows that large speculators are net long. Negative value shows that large speculators are net short. The data is published every Friday and is delayed because it shows the status on Tuesday of the week.

The total net positions of large speculators show the sentiment this group has in the market. A positive value of the total net positions of speculators indicates bullish sentiment, a negative value of total net positions indicates bearish sentiment.

When interpreting charts and values, it is important to follow the overall trend of total net positions. The turning points are also very important, i.e. the moments when the total net positions go from a positive value to a negative one and vice versa. Important are also extreme values of total net positions as they often serve as signals of a trend reversal.

Sentiment according to the reported positions of large players in futures markets is not immediately reflected in the movement of currency pairs. Therefore, information on sentiment is more likely to be used by traders who take longer trades and are willing to hold their positions for several weeks or even months.

Detailed analysis of selected currencies

Explanations:
 

Purple line and histogram in the chart window: this is information on the total net position of large speculators. This information shows the strength and sentiment of an ongoing trend.

Green line in the indicator window: these are the bullish positions of large speculators.

Red line in the indicator window: indicates the bearish positions of large speculators.

If there is a green line above the red line in the indicator window, then it means that the overall net positions are positive, i.e. that bullish sentiment prevails. If, on the other hand, the green line is below the red line, then bearish sentiment prevails and the overall net positions of the big speculators are negative.

Information on the positions of so-called hedgers is not shown in the chart, due to the fact that their main goal is not speculation, but hedging. Therefore, this group usually takes the opposite positions than the large speculators. For this reason, the positions of hedgers are inversely correlated with the movement of the price of the underlying asset. However, this inverse correlation shows the ongoing trend less clearly than the position of large speculators.

Charts are made with the use of www.tradingview.com.
 

Euro

Date	Weekly change in open interest	Weekly change in total net positions of speculators	Weekly change in total long positions of speculators	Weekly change in total short positions of speculators	Sentiment
23/7/2021	-5,900	-13,900	-4,200	9,700	Weakening bullish
16/7/2021	-10,400	-17,500	-200	17,300	Weakening bullish
9/7/2021	2,000	-10,000	3,900	13,900	Weakening bullish

 

Total net speculator positions fell by 13,900 contracts last week. This change is due to a decrease in long positions by 4,200 contracts and an increase in short positions by 9,700 contracts.

The price of the euro weakened last week and is approaching significant support at the 1.1700 level. Last week's ECB meeting was rather dovish in tone as the ECB indicated that, unlike the central banks of the US, Canada or New Zealand, it is not yet considering tapering bond purchases due to concerns about the spread of the Delta coronavirus variant.

Long-term resistance: 1.2240 - 1.2350

Long-term support: 1.1700 - 1.1750
 

The British pound

Date	Weekly change in open interest	Weekly change in total net positions of speculators	Weekly change in total long positions of speculators	Weekly change in total short positions of speculators	Sentiment
23/7/2021	16,400	-11,500	-500	11,000	Bearish
16/7/2021	-6,400	-13,900	-12,500	1,400	Weakening bullish
9/7/2021	9,600	4,200	5,600	1,400	Bullish

 

In the past week, the total net positions of speculators fell by 11,500 contracts and entered a bearish negative range. This change is the result of a decrease in long positions by 500 and an increase in short positions by 11,000 contracts.

The pound weakened against the US dollar last week and broke through the support level. However, it closed above this level and the weekly pin bar candle suggests a rejection of lower prices. Therefore, we have kept the broken support level for now.

 

Long-term resistance: 1.42-1.4350

 

Long-term support: 1.3670-1.3700
 

The Australian dollar

Date	Weekly change in open interest	Weekly change in total net positions of speculators	Weekly change in total long positions of speculators	Weekly change in total short positions of speculators	Sentiment
23/7/2021	7,600	-6,900	400	7,300	Bearish
16/7/2021	8,600	-3,900	3,400	7,300	Bearish
9/7/2021	6,900	-7,100	4,500	11,600	Bearish

 

Last week, speculators' total net positions fell by 6,900 contracts. This change is due to an increase in long positions of 400 contracts and an increase in short positions of 7,300 contracts.

The Australian dollar weakened last week and reached support at 0.7400. This support was then broken on Monday morning. In the event that this breakout is valid, meaning that it is not a false break, the Australian dollar could weaken further.

Long-term resistance: 0.7550-0.7600

 

Long-term support: 0.7400-0.7450 (currently broken)

Next long-term support:0.7000-0.7050  

The New Zealand dollar

 

Date	Weekly change in open interest	Weekly change in total net positions of speculators	Weekly change in total long positions of speculators	Weekly change in total short positions of speculators	Sentiment
23/7/2021	1,100	-200	0	-200	Weakening bullish
16/7/2021	700	1,400	1,200	-200	Bullish
9/7/2021	400	-1,300	-500	800	Weakening bullish

Last week, total net positions fell by 200 contracts, which is the result of a 200 contract increase in short positions.

The NZD is trading near a support level that has been tested several times and broken last week.

Resistance: 0.7370-0.7450

Long term support: 0.6760-0.6800