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COT: Dollar buying accelerates while VIX selling continues

Commitments of Traders report covering speculative positioning in FX, bonds and stocks in the week to November 19

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

Buying of dollars accelerated in the week to November 19 with the non-commercial long against ten IMM currency futures rising by $2.6 billion to $17.1 billion, a four-week high. All but two currencies were sold with CAD, EUR and AUD seeing the bulk of the activity.

Despite gaining some ground during the reporting week the EUR net-short nevertheless increased to 62,503 lots, the largest in four weeks. The AUD short rose by 16% to 47,240, its biggest since mid-October.

Leveraged fund positions in bonds, stocks and VIX

With just four full weeks of trading left before the markets wind down for yearend, leveraged funds held a near record long in Fed Funds futures while being the most bearish the S&P 500 Index since September 2017. The non-commercial net short in the Cboe VIX future meanwhile continued to rise and last week it reached a fresh record of 218,362 lots, i.e. $218 million per each 1% change in volatility. The selling is driven by the very steep forward curve where the  spot VIX at 12.55% currently trades some 4% below the second futures month of January. Short sellers will earn the time decay as long the market remains calm and doesn’t suddenly spike higher.

 


What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
– Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
– Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
– Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)

Ole Hansen
Head of Commodity Strategy
Saxo Bank
Topics: Forex COT FX USDJPY USD GBPUSD USDCAD Futures AUDUSD NZDUSD USDMXN USDCHF Usdrub FX Positioning

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