Positions of large speculators according to the COT report as at 1/3/2022

The Euro

Figure 1: The euro and COT positions of large speculators on a weekly chart and the EURUSD on D1

The total net positions of speculators reached 64,939 contracts last week, which is an increase by 5,633 contracts compared to the previous week. This change is due to an increase in long positions by 14,190 contracts and an increase in short positions by 8,557 contracts. These data suggest continued bullish sentiment in the euro.
Open interest, which has increased by 23,293 contracts in the last week, shows that the downward movement that occurred in the euro last week was supported by volume and is therefore strong.
The euro is weakening sharply under the influence of the war in Ukraine and we can see that support levels have not been respected in such a strong trend. In a strong downtrend it is very risky to try to catch the bottom and open bullish long positions. 

Long-term resistance: 1.0980 – 1.1010. Next resistance is near 1.1120 – 1.1150.
Support: 1.0640-1.0700

The British pound

Figure 2: The GBP and COT positions of large speculators on a weekly chart and the GBPUSD on D1

The total net positions of speculators last week reached to -337 contracts, having increased by 5,472 contracts compared to the previous week. This change is due to an increase in long positions by 5,430 contracts and a decrease in short positions by 42 contracts. This suggests bearish sentiment, but it is weak as the total net positions of large speculators increased.
Open interest, which rose by 23,426 contracts last week, means that the fall in the pound that occurred last week was supported by volume and is therefore strong.
Risk off sentiment due to the war in Ukraine continues to weigh on the pound as well as the euro and therefore the pound is weakening strongly.

Long-term resistance: 1.3270-1.3300.  Next resistance is near 1.3420 – 1.3440. The resistance is also in the zone 1.3490 – 1.3520.
Support is near 1.3150 – 1.3200.  
 

The Australian dollar

Figure 3: The AUD and COT positions of large speculators on a weekly chart and the AUDUSD on D1

The total net positions of speculators last week reached to - 78,336 contracts, up by 5,744 contracts compared to the previous week. This change is due to an increase in long positions by 1,167 contracts and a decrease in short positions by 4,577 contracts. This data suggests a weakening of bearish sentiment in the Australian dollar.
However, last week we saw a decline in open interest by 2,912 contracts. This means that the upward movement that occurred last week in the AUDUSD was weak because new money did not flow into the market.
The Australian dollar has been strengthening strongly recently, which is explained by the rise in the prices of commodities that Australia exports. These commodities include coal, gas and gold. 

Long-term resistance: 0.7520-0.7560                                                                                                             
Long-term support: 0.7085-0.7120.  A strong support is near 0.6960 – 0.6990.
 

The New Zealand dollar

Figure 4: The NZD and the position of large speculators on a weekly chart and the NZDUSD on D1
 

The total net positions of speculators last week reached a value of - 14,172 contracts, having fallen by 2,621 contracts compared to the previous week. This change is due to a decrease in long positions by 6,858 contracts and a decrease in short positions by 4,237 contracts. This data suggests that the bearish sentiment for the NZD continues.

Last week, open interest fell significantly by 6,247 contracts. Therefore, the upward movement in the NZDUSD that occurred last week is not supported by volume and therefore the price action was weak.
The strengthening of the NZDUSD that occurred last week is somewhat surprising given the geopolitical tensions in Ukraine and risk off sentiment. What helped the NZD rise are rising prices of commodities  such as milk, which New Zealand produces.

Long-term resistance: 0.6850 – 0.6890
Long-term support: 0.6590-0.6600 and the next support is at 0.6500 – 0.6530.
 

Explanation to the COT report

• The COT report shows the positions of major participants in the futures markets. Futures contracts are derivatives and are essentially agreements between two parties to exchange an underlying asset for a predetermined price on a predetermined date. They are standardised, specifying the quality and quantity of the underlying asset. They are traded on an exchange so that the total volume of these contracts traded is known.

• Open interest: open interest is the sum of all open futures contracts (i.e. the sum of short and long contracts) that exist on a given asset. OI increases when a new futures contract is created by pairing a buyer with a seller. The OI decreases when an existing futures contract expires at a given expiry time or by settlement.
• Low or no open interest means that there is no interest in the market. High open interest indicates high activity and traders pay attention to this market. A rising open interest indicates that there is demand for the currency. That is, a rising OI indicates a strong current trend. Conversely, a weakening open interest indicates that the current trend is not strong.

• 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. Traders should try to trade in the direction of these large speculators.
• 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.
• The COT data are usually reported every Friday and they show the status on Tuesday of the week.
• 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.