Weekly COT report Analysis + Trade Ideas

Accordingly to the latest bloomberg report, Europe will bail Greece out and that is a massive boost for EURUSD.

I am hoping for a retrace to atleast 1.3850-80 before any further development on fundamental front.

Cheers

I heard that too but it seems later on the report is denied by J.C trichet, we need to wait and see what will happen on Mon.
but funamental aside I think technically and sentiment wise this E/U needs a nice correction up.

a diamond top is in place, according to the textbook this pattern is 75% reliable, having said that the dwontrend should continue till 1.500 with ease.
I thnik of a sell order at 1.5800-30 R zone ( S truns R) , look at the arrows which indicate the price change in just one touch, this line hasnt been touch as a R (twice as S) so I think this would be a nice opportunity to get into short train, Sl=1.6075

large institute decrease their long A/U from 45,318 to 33,271 contracts
COT index (13 weeks) changed from 42 to 2 ( close to bearish extreme)
considering net long positions and COT bearish extreme I think we might see higer level this week.
on the other hand if risk aversion continue this week and the long A/U positions keep unwinding a break below .8570 open more downside

I prefer a long position this week considering COT reading of 2 (bearish extreme) .
Buy a break above R at .8715 SL=8570
on the other hand we can sell on the break of S at .8570 aiming lower level. at the end I think we see a beark above R at .8715

note the inverse price quotation ,
large institute reduced their long CADUSD (short USDCAD) from 25,809 to 15,355 contracts.
COT index changed from 14 to 0 (bearish extreme for CADUSD/ dullish extreme for USDCAD).
having said that I think USDCAD might go lower this week

considering extreme reading of COT index I prefer to sell a break of S at 1.06430

very good thread, mate...wonder how i missed this thread for soo long...nice to see the good long slow trades...
anyway, gold seems to be set for 1030...which means eu should still have a bit more downside....

Hi ns_karthik, thanx,

regarding E/U , almost anyone says E/U should continue the free fall,
here is the EWI intraday EW count for E/U , they have the same view as you do (this chart is from EWI)

do they have any targets for eu short??

and do u have any hedging tool??

here is their target :"Wave three would be 1.618x wave one at 1.3076."

as for hedging, I can hedge with my broker, I go long/short at the same time with the same pair,
my concept of hedging is different though , I use it intead of SL in my trades ,the rational is you can get a second chance to survive- you hedge at Sl, then un-hedge in turning point, tp on hedge then switch to first position- then close on average, if it doesnt work hedge agian,
but it's a bit complex and it's not practical all the time

This is my AUD/NZD analysis. Could be a break out soon?

SOURCE FX360

by Boris Schlossberg
After a rudderless G7 meeting over the weekend that saw no resolution on the Greek crisis, risk currencies drifted lower once again at the start of Asian session trade, but rebounded sharply on short covering flows when European markets opened for business. The G7 meeting produced no concrete agreement on the issue of Greece’s fiscal problem. Furthermore congregants proposed a possible 15bp levy on the banking sector to help pay for the massive fiscal deficits incurred by all the members in 2009. The tax should it ever go into effect would no doubt only aggravate the capital markets putting an additional cost on the finance sector. Nevertheless, despite absence of any positive news high beta FX rallied strongly in early morning London trade.
As we noted earlier,” Although the euro remains pressured by the political and fiscal upheaval in the union, the currency is now grossly oversold after declining for 12 out of the last 15 days. The latest data from CFTC shows that euro positioning has turned strongly negative with shorts growing to 43.7K contracts from 39.5K the period prior. The increase in shorts is now at a record in the series and argues for some sort of technical bounce as late comers get squeezed.” The push higher was led by Russians, who are typically very adroit traders of inflection points in the FX market and suggests that for now the EURUSD may have found a temporary bottom at the 1.3600 level.
With very little economic data on the calendar this week the pair is likely pause for few days after taking a massive drubbing that saw the EURUSD decline more than 1000 points over the past month. Still we believe any bounce here will simply be a tactical opportunity to sell as the neither the political nor the economic climate in the region appears to show any signs of improvement for the time being. The one silver lining for the EZ economy as a result of the recent euro weakness is the considerable alleviation of cost to the key export sector. However, with demand in China likely to cool off and US consumer still moribund, its difficult to determine if the lower exchange rates will provide any material benefit to EZ producers.
With nothing on the eco calendar for the rest of the day, risk FX is likely to be driven by equity flows. Last Friday’s late session rally in the dow eased most of the intra-day losses and if index can recapture the 10,000 level today it can provide a further boost to high beta currencies. Having retaken the 1.3700 figure, the market may set its sight on the 1.3755 post NFP high as the next marker to squeeze the late shorts

SOURCE : EWI,
intraday update

SOURCE : EWI
intraday update

Written by Danske Bank | Feb 08 10 09:58 GMT |

Short EUR positions at record level
The latest IMM data cover the week from 26 January to 2 February.
A broad-based flight from the riskier currencies coupled with Euro-zone sovereign debt fears have seen non-commercial investors add to their net long USD positions, which have now reached the highest levels since March last year.
Concerns over a possible debt contagion in southern Europe continue to spook investors, causing a further build-up of short EUR positions. As a result, short EUR positions have grown to USD7.6bn, which marks a record for the series. While this could present an upside risk to EUR/USD in case of a position squeeze, the timing of a possible correction is highly uncertain (cf. the build-up in short USD positions in 2009).
Coinciding with the past weeks' setback on equity markets, and the difficult environment for risky assets in general, positioning in JPY has turned and is now net long. Also, speculative long positions in AUD, NZD and CAD have been reduced. Long AUD positions in particular have been taken off, likely induced by the surprise decision by the RBA to leave the cash rate on hold. Thus, the Aussie is no longer the favoured 'long trade' in G10 FX.
Speculative investors are again net short CHF, as signs of intervention indicate that the SNB may still act to weaken the Swiss Franc.

SOURCE:OANDA

How To Interpret These Graphs

 

1. Long-Short Ratios—Identify whether traders are longing or shorting the major currency pairs, and by how much. This graph (on the left) plots colored bars showing the ratio of long positions to short positions, one bar for each currency pair. Values are in percentages (the higher the bar, the higher the percentage of long positions).
2. Position Ratios—Identify which currency pairs have the most open positions. This pie chart (on the right) shows the ratios of the open positions (both long and short) held for each major currency pair relative to the number of all positions for all the major currency pairs.

Thanks for the useful thread Shaha.....I have often wondered about COT reports and the quick skim I gave the first part of this thread gives me reason to really dig in. Thanks for sharing your knowledge and taking the time to do this.

I find myself so involved with trading that I don't frequent FF much except for news, but occasionally I will find a thread that catches my eye and yours is one.

http://upload.wikimedia.org/wikipedi...erland.svg.png UBS AG:

EURUSD: Forecast change (February 5, 2010, 5:18 PM)
We lower our forecast for EURUSD to 1.35 in 3M, 1.42 in 6M and 1.53 in 12M (prev. 1.53, 1.57, 1.57). Europe's halfhearted way of handling the Greek debt situation hurts the confidence in the euro. For this reason the next months could even bring tests of the Dec 2009 lows of 1.24.
CHF: Forecast change (February 5, 2010, 5:12 PM)
We revise upwards our USDCHF forecast to 1.10, 1.06, 0.99 for three, six and twelve months (previously 0.97, 0.96, 0.97), as we expect the USD to continue to benefit from the fiscal troubles in the euro-zone. Our EURCHF forecasts remains unchanged at 1.48, 1.50, 1.52 for three, six and twelve months
GBPUSD, EURGBP: Forecast change (February 5, 2010, 5:10 PM)
We lowered our GBPUSD forecast to 1.58 in 3M, 1.62 in 6M (previously 1.66, 1.70). We also lowered our EURGBP forecast to 0.85 in 3M, 0.88 in 6M and 0.90 12M (previously 0.92, 0.92, 0.92). The current worries about debt in Europe make the pound a bit stronger vs. the euro and a bit weaker vs. USD.
AUDUSD, NZDUSD: Forecast change (February 5, 2010, 5:09 PM)
We change our three and six month AUDUSD forecasts to 0.90 and 0.94, while 0.70, and 0.73 for NZDUSD. We keep our old 12-month forecasts in both pairs. We expect growth in the Chinese economy to stand firm by the commodity demand and currencies. The sell-off thus offers opportunities, in our view.
USDJPY, EURJPY: forecast change (February 5, 2010, 5:05 PM)
We change our three and six month USDJPY forecasts to 92 and 97, while keeping the 12-month forecast of 105. In EURJPY, our new three, six and 12-month forecasts are 124, 138 and 161 respectively. The risk reversion is the life line to the Japanese yen. The deflation however will weigh on the JPY.

hi sandpipper , thanx for the comment, I hope it helps in getting the big pic somehow. this thread is a mixture of COT/SSI and technical, I invite my friends to post their charts and ideas here, you are more than welcome :-)