Weekly COT report Analysis + Trade Ideas

I think you are right, long eur isnt playing well at all although I'm just -40 pips in red but I placed my hedge orders at 1.36550 , its not an all-in trade just a simple trade like others but for now is a loser

Yeah, so much for that short squeeze the COT was suggesting. Not much. Just read these articles on FF news:

http://www.forexfactory.com/news.php?do=news&id=219349

http://www.forexfactory.com/news.php?do=news&id=219353

[EDIT] Amazingly US futures are in the green at the moment

No entry or exits (sorry). Just my current USD/CHF 4 hour analysis. 1.075 is a big one too unless I am mistaken.

Just went long on the GPB/USD. Still haven't set TP's (yet) but I am expecting quite a bit of reactivity from 1.5680.

timing with COT is the challenge - The Top on EUR/USD was almost instant as was the top on AUD/USD with moves occuring within a few days of extreme readings - other times it cant take a couple of months or more - and sometimes the reversal fails to appear at all. As with all trading tools there is little or no edge if used in isolation. It is just another handy tool in the trader tool box. Hammers are not very effective without nails

As for the bad news thats causing all the selling, a bottom will form precisely when the news is at its worst. There really isnt a strong fundamental reason to exchange EURO for USD and that goes double for AUD. The US sovereign debt is as bad as anything Europe has. California or N.Y could become America,s Greece next week for all we know.

Yep, I used to have a problem trying to explain to other posters that FXCM's sentiment index was just another tool. Some posters just didn't get it.

The bearishness on the EUR does remind me of the same type of coverage as when the USD was on the ropes. PIMCO is saying to avoid EUR and EUR equities and I see Morgan Stanley are pumping for 1.28. The ECB must be loving it - having a lower EUR that is. They don't need to do much "talking it down" at the moment

Daily Market Strategy attached

SOURCE : EWI


The recovery from October 2008 is in three waves, a flat correction. That leaves the euro vulnerable to a trend reversal.

"The rally from March looks like a five-wave affair and that leaves the euro vulnerable. Just a correction could visit the sub-1.40 area. If the rally completed a larger correction from October, ending in a potential failure, the euro could start a lengthy decline."

SOURCE : EWI

The dollar setback since November looks corrective, despite falling below the 61.8% retracement level.

With the dollar poised to rally against most other currencies we favor the dollar bottoming and advancing against the loonie also.

pateince this one is for you

SOURCE : EWI

Continue to favor a bearish AussieYen after pivotal support of 78.57 failed. Support is at 76.21, a previous support cluster from the 4th wave triangle. A penetration of this support would open up trade toward our target of 74.34, a .382 retracement. Risk was literally swapped for safety at any price today in the Yen as deleveraging continues.

Puks, your favorite pair

SOURCE : EWI

Aussie broke the low from December, strengthening the failure top scenario. A fifth wave failure is a sign of underlying weakness and if this count is correction Aussie will extend lower with rebounds proving brief and shallow.

There may be support in the .8155-.8200 area and again in the .7700 area.

SOURCE : EWI

Given the general outlook for dollar strength any sterling recovery should prove corrective. Resistance extends to the 1.6072 area, though that seems a stretch.

The decline below 1.5833 damaged the bullish triangle alternate count. Weakness below 1.5709 would eliminate it completely. The best alternate would be a double zigzag with a measured objective at 1.5544.

Nice info on the E/U. I rode down the E/U & G/J this week. Now I only hold the E/U.

Hi Leche Mocha,
so you were short E/U & G/J this week , well done. why didnt you close your E/U at 1.3590?/ the price bounced from there twice , you could go short E/U again from higher prices, I personally think we see a correction higher , then down again

Thanks Shahab,

I haven't traded AUD this week since I got out of my trapped shorts from .8900. I only wish I held on to my shorts.

Anyways, I am trapped in Long EUR and cable since this GCC (Global currency crisis) started a couple of days back.

But I will use AUDJPY and AUDUSD to rescue me from this mess.

Target GU at 1.59 or 1.5850 and EU at 1.3780.

Cheers
Puks

I got trapped at long E/U too , I went long at 1.3750, then I hedged at 1.3700 till 1.3590, then I un-hedged at 1.3600 and now net long, the short hedges made me + 100 pips so right now I can get out at B/E but I think a correction is on the card,
here is the fundamental reason to see a E/U correction higher,

"Feb. 5 (Bloomberg) -- U.S. stocks rose, with the Dow Jones Industrial Average erasing a 167-point drop in the final hour of trading, on speculation the European Union may propose a solution for Greece’s budget deficit. Oil, gold and copper rebounded, and the dollar pared its gain.
http://www.bloomberg.com/apps/news?p...q.BBSMdc&pos=1

“People don’t want to be short over the weekend if the EU says it will bail out Greece and Spain,” said Neil Massa an equity trader at MFC Investment Global Management Co. “A lot of investors were short, and they’re closing their positions because they don’t want to get caught if something happens over the weekend.”

Thanks for that. Nice to see that one of my charts has this fib on it. I was thinking that this may be the next target. Looks like I might be using the sub-account for shorting purposes again but I've topped up my other accounts now so I won't be jumping out of the window yet

FXCM's traders are so loaded up on long USD/JPY and GBP/JPY that I'll assume it's the same with A/J. Interesting to note that open interest has dropped significantly. That always says to me that either traders are tired of fighting the trend or they've wiped their accounts.

SSI: Retail EURUSD Open Interest Drops 13% as Traders Unwind Counter-Trend Positions
Friday, 05 Feb 2010 19:39 GMT
Written by John Kicklighter

FXCM Speculative Sentiment Index (SSI) Statistics:



SSI Details:

EURUSD - The ratio of long to short positions in the EURUSD stands at 1.46 as nearly 59% of traders are long. Yesterday, the ratio was at 1.96 as 66% of open positions were long. In detail, long positions are 22.2% lower than yesterday and 6.2% weaker since last week. Short positions are 4.7% higher than yesterday and 18.8% stronger since last week. Open interest is 13.1% weaker than yesterday and 7.6% below its monthly average. The SSI is a contrarian indicator and signals more EURUSD losses.

GBPUSD - The ratio of long to short positions in the GBPUSD stands at 2.03 as nearly 67% of traders are long. Yesterday, the ratio was at 2.14 as 68% of open positions were long. In detail, long positions are 10.6% lower than yesterday and 1.2% weaker since last week. Short positions are 6.1% lower than yesterday and 14.3% weaker since last week. Open interest is 9.2% weaker than yesterday and 13.1% below its monthly average. The SSI is a contrarian indicator and signals more GBPUSD losses.

GBPJPY - The ratio of long to short positions in the GBPJPY stands at 2.30 as nearly 70% of traders are long. Yesterday, the ratio was at 2.91 as 74% of open positions were long. In detail, long positions are 8.4% lower than yesterday and 25.8% stronger since last week. Short positions are 15.9% higher than yesterday and 11.4% weaker since last week. Open interest is 2.2% weaker than yesterday and 1.2% above its monthly average. The SSI is a contrarian indicator and signals more GBPJPY losses.

USDJPY - The ratio of long to short positions in the USDJPY stands at 2.91 as nearly 74% of traders are long. Yesterday, the ratio was at 2.85 as 74% of open positions were long. In detail, long positions are 2.2% lower than yesterday and 18.8% stronger since last week. Short positions are 4.0% lower than yesterday and 19.6% weaker since last week. Open interest is 2.7% weaker than yesterday and 0.6% above its monthly average. The SSI is a contrarian indicator and signals more USDJPY losses.

USDCAD - The ratio of long to short positions in the USDCAD stands at 1.08 as nearly 52% of traders are long. Yesterday, the ratio was at -1.27 as 56% of open positions were short. In detail, long positions are 4.7% lower than yesterday and 0.9% stronger since last week. Short positions are 31.0% lower than yesterday and 22.3% weaker since last week. Open interest is 19.5% weaker than yesterday and 24.0% below its monthly average. The SSI is a contrarian indicator and signals more USDCAD losses.

USDCHF - The ratio of long to short positions in the USDCHF stands at 1.08 as nearly 52% of traders are long. Yesterday, the ratio was at -1.18 as 54% of open positions were short. In detail, long positions are 9.5% lower than yesterday and 5.7% stronger since last week. Short positions are 28.8% lower than yesterday and 8.8% weaker since last week. Open interest is 19.9% weaker than yesterday and 19.0% below its monthly average. The SSI is a contrarian indicator and signals more USDCHF losses.

AUDUSD - The ratio of long to short positions in the AUDUSD stands at 1.37 as nearly 58% of traders are long. Yesterday, the ratio was at 1.83 as 65% of open positions were long. In detail, long positions are 18.0% lower than yesterday and 2.4% stronger since last week. Short positions are 9.6% higher than yesterday and 16.2% stronger since last week. Open interest is 8.3% weaker than yesterday and 7.8% below its monthly average. The SSI is a contrarian indicator and signals more AUDUSD losses.

NZDUSD - The ratio of long to short positions in the NZDUSD stands at 1.42 as nearly 59% of traders are long. Yesterday, the ratio was at 1.91 as 66% of open positions were long. In detail, long positions are 28.6% lower than yesterday and 7.3% weaker since last week. Short positions are 3.7% lower than yesterday and 9.8% stronger since last week. Open interest is 20.0% weaker than yesterday and 15.1% below its monthly average. The SSI is a contrarian indicator and signals more NZDUSD losses.



Nice, nasty turnaround late on Friday due to a late Dow rally and traders not wanting to keep their positions open due to G7 meeting. Hope those that were short had their stops in profit before going out to have a brew at the local. This late rally has produced a rather nice looking pin on daily USDX.



And this article is fairly positive for the risk trade come Monday. We'll see how the market reacts. Short squeeze?

http://www.forexfactory.com/news.php?do=news&id=219543


Financial Markets Overview attached. Keep it green.

Thanks. I just think the E/U bears have been so strong that there is more downside to come. The Euro Zone countries are having one piece of bad news to weaken the Euro after another. That 61.8 fib level on your Daily chart looks like a good place for me to cover.

And the G/J has an awful habit of whipsawing a trader's profits away so I tried to use disciple and take them before the Forex big boys take them from me.

the large institute added to their short E/U positions during last week and the net short positions increased from 39,539 to 43,741 contracts.

COT index (13 weeks) reading is 0 (bearish extreme) ,as you notice we have 2 weeks in row with 0 reading.

I included a 3 years chart too in order to emphasize on how crowded is the short side of E/U , look at the retracement that we had in E/U short extremes in Sept 08.

in conlculsion, I call for a correction higher this week unless something unusal happens in Eurozone this week.

Although E/U price went to 40 pips of my SL at 1.3550 on fri ,I still think a correction of this ab=cd pattern is due this week,
I looked over the proportion of ab=cd and I notice I made a mistake on locating the D point , now with use of Fibonacci projection of 100% the D point is located at 1.3600 not the previous 1.3750 ,

- LONG E/U at current level, SL=1.3550 TP=TBD

the large institute added to their short G/U positions during last week.
the net G/U short positions increased from 27,135 to 33,968 contracts.

COT index (13 weeks) is getting closer to extreme reading , from 28 to 5.Having said that the more downside is on the card.