Currency Markets

Currency Weekly November 27, 2022

Nov 27, 2022

Thomas Thornton

Commitment of Traders – The Basics

The Commitments of Traders (CoT) is a weekly report released by the Commodity Futures Trading Commission (CFTC). The CoT report outlines how different traders are positioned in the futures markets. There are two main types of traders in a CoT report: commercials and money managers.

Commercials are the producers and users of a commodity that use the futures markets to hedge. A commercial producer in the corn market could be a farmer who sells corn futures to lock in his selling price. Commercial traders are considered the “smart money” since they are in tune with the physical commodity business and likely have superior supply/demand information. The other main CoT trader type, money managers, comprises hedge funds, mutual funds, and commodity trading advisors. These speculative traders have no interest in the underlying physical commodity business.

CoT data is most meaningful at extremes when either commercial traders or speculators are super net long or net short. The charts below are mostly self-explanatory by looking at the color-coded type of traders. For a more detailed explanation, please see the bottom of this note.

DeMark Indicators basics at the bottom of this note

Highlights and themes

  • Several weeks ago, there were DeMark exhaustion signals on the US dollar on the upside on the daily and weekly charts
  • “Was this the top” was the question after several short-lived reversals. Now it’s looking more pronounced as a top.
  • Now there are continuation Sequential trend Countdowns in progress that could see recent trends continue lower for the US Dollar and upside for crosses
  • Crypto remains depressed despite a few downside exhaustion signals on the daily charts

Currency Sentiment Overview

Currency sentiment highlights show the US Dollar back under 50% and a recent breakdown under the one-year support level at 60% bulls.

US Dollar Indexes

DXY US Dollar Index daily now has a Sequential Countdown in progress and can go lower or sideways from here. There will be people watching the 200 day moving average.

DXY US Dollar Index weekly could see a buy Setup 9 in December if the pattern continues. To complete the weekly Setup 9 there must be nine consecutive weekly closes lower than the close four price bars earlier.  If this pattern is interrupted the Setup will cancel and disappear from the chart

US Dollar bullish sentiment with a new one-year low breaking below the support at 60% that held all year.

US Dollar Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

Bitcoin and Ethereum

Bitcoin Daily did get some buy signals recently with no response. The Weekly still has a Countdown’s in progress.

Bitcoin Bullish Sentiment has been depressed since May.

Ethereum Daily with a recent buy Setup 9 and the weekly still has a pending Sequential in progress

Major USD Crosses

EURUSD Euro / US Dollar is at the 200 day for the first time in quite a while. The Sequential in progress is more important to see if this can continue.

Euro bullish sentiment is at 50% and trying to move higher

Euro Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

GBPUSD British Pound Sterling / US Dollar with a very similar chart as others with the Sequential in progress

British Pound Sterling bullish sentiment improving over 50%

British Pound Sterling Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

AUDUSD Australian Dollar / US Dollar also with a Sequential in progress

Australian Dollar bullish sentiment has 50% as resistance

Australian Dollar Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

USDCAD US Dollar / Canadian Dollar

Canadian Dollar bullish sentiment with higher lows but failure below 50% has happened a few times in the past 6 months

Canadian Dollar Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

USDCHF US Dollar / Swiss Franc consolidating?

Swiss Franc bullish sentiment also shows a failure at 50%

Swiss Franc Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

USDJPY Japanese Yen consolidating and could continue the trend this week.

Japanese Yen Bullish Sentiment with a higher low

Yen Commitment of Traders

RISK On Risk Off

This cross is often used as a risk-on / risk-off indicator

EURAUD Euro / Australian Dollar

New Zealand Dollar

NZDUSD is a little further along in the Sequential Countdown

New Zealand Dollar Bullish Sentiment is overbought now

New Zealand Dollar Commitment of Traders

Three major Yen crosses

EURJPY Euro / Japanese Yen

GBPJPY British Pound Sterling / Japanese Yen

AUDJPY Australian Dollar / Japanese Yen

US Dollar vs Emerging Markets

USDTRY US Dollar / Turkish Lira

USDBRL US Dollar / Brazilian Real

USDMXN US Dollar / Mexican Peso

Mexican Peso bullish sentiment

Mexican Peso Commitment of Traders large speculators and weekly DeMark Setup, Sequential, and Combo indicators

USDZAR US Dollar / South African Rand

USDCNH US Dollar / Chinese Offshore Renminbi (Yuan)

DeMark Sequential Basics from Bloomberg

More detailed Commitment of Traders explanation