Positions of large speculators according to the COT report as at 8/3/2022

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 - 12,526 contracts, having fallen by 12,189 contracts compared to the previous week. This change is due to the growth in long positions by 3,303 contracts and the growth in short positions by 15,492 contracts. This suggests bearish sentiment as the total net speculators positions  are negative while there has been a further decline as well.

Open interest, which rose by 34,443 contracts last week, means that the fall in the pound that occurred last week was supported by the volume and it was therefore a strong price action.

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: 1.3180-1.3210.  Next resistance is near 1.3270 – 1.3330.
Support is near 1.3000.  
 

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 78,195 contracts, up by 141 contracts compared to the previous week. This change is due to the growth in long positions by 6,801 contracts and the growth in short positions by 6,660 contracts. This data suggests a weakening of the bearish sentiment for the Australian dollar.

Last week we saw an increase in open interest of 7,427 contracts. This means that the downward movement that occurred last week was supported by volume as new money flowed into the market.

The Australian dollar weakened quite significantly last week. This may be explained by the fact that there has been a fall in prices in commodities that Australia exports (e.g. gold, coal). The decline in commodity prices also reflects efforts to find a diplomatic solution to the war in Ukraine. 

Long-term resistance: 0.7370-0.7440                                                                                                             
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 reached a negative value last week - 12,379 contracts, having increased by 1,793 contracts compared to the previous week. This change is due to an increase in long positions by 5,290 contracts and an increase in short positions by 3,497 contracts. This data suggests that the bearish sentiment on the NZ dollar has weakened over the past week.

Open interest rose significantly by 2,861 contracts last week. The downward movement in the NZDUSD that occurred last week was therefore supported by volume and therefore the move was strong.

The weakening in the NZDUSD that occurred last week can be explained by the decline in the prices of commodities that New Zealand produces.

Long-term resistance: 0.6850 – 0.6920
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.