How Commitments of Traders Report predicted major downtrend in AUDUSD
- November 19, 2017
- Posted by: Roman Sadowski
- Category: Best Forex Blog on The Planet
Many traders discount the Commitments of Traders report as a functional indicator.
They are of the opinion the data lags five days hence it is invalid and cannot be used in trading.
This is far from the truth.
Here is just another example of how powerful Commitments of Traders Report can be in the hands of a skillful trader.
This time the C.O.T analysis spotted a perfect top in AUDUSD – once again!
Aussie had been trending up since Jan 2016 from 0.7100 bottom to a top at 0.8150 in September this year. The uptrend consisted of few major swings up and down, but the price managed to trade higher at the end of each cycle.
During this time (Jan 2016 – Sep 2017) the price moved from lows at 0.7100 to highs at 0.8150.
This is 1100 pips, assuming the trader took the position at the beginning and exited at the end of the trend.
More profits were possible if the trader was able to recognise local swings during this time range.
Was it possible?
Our Commitments of Traders weekly report spotted two major swings in AUDUSD during this period. Each time the move lasted for several hundred pips.
“Again the price followed bullish sentiment among Non-Commercial traders from few weeks ago when they became NET LONG in AUD futures. This week, the same pattern continues. NC traders added another 4K long positions to their portfolios and reduced shorts by 3.3K. This suggests further increase in price in AUD Dollar in the coming weeks.”
And it did
“It looks like the tables have turned in Australian Dollar Futures. Speculators switched from being net short to be 5K positions net long.
Although, speculative net positions are still below 33 weeks moving average, the fact they now hold more long then short positions makes me believe this market is going higher from here.”
And it did
Few weeks ago Commitments of Traders figures pointed once again to yet another top at the resistance @0.8150 and suggested the market was ready for a longer term decline.
“This week speculators added a vast amount of longs ( 9.4K ) and 3.3K new shorts. They were 66K net long, highest level since March 2013! They held 66.3% of the total open interest in longs. This is getting close to the tipping point of 67% when the price collapsed back in March 2017. Open Interest was also highest since 2015. It seem like the perfect storm for the reversal is playing out.
- Highest open interest
- Highest net long positions
- High share of the open interest in longs
- It looks like this market is about to make a turn”
And then in
C.O.T REPORT – WEEK 39. AUSSIE DOOMED FOR MORE LOSSES. SPECS GBP BULLISH DESPITE LOWER PRICES
the signal became even more clearer
“This week speculators left their longs unchanged but covered 5K shorts. They were 71K net long, down from the extreme level of 77K in the previous week. They held 67% of total Open Interest in longs. This is an extreme and defined as a “tipping point” for Aussie futures. As the market has already topped and moved lower ( 400 pips ), I strongly expect much more decline to follow in the coming weeks. Next support 0.75. It is likely to be easily broken and followed by more selling.”
As of today, AUDUSD it trading at multi-months lows and it closed the previous week at 0.7563.
This is 600 pips from the predicted resistance/top few weeks ago.
The price never looked back, and it looks like there is much more downside left to go.At the same time COT analysis suggested major decline in NZDUSD, after which the pair dropped from 0.7500 resistance to the current 0.6800 support. This is another 700 pips move in the space of two months!
Commitments of Traders points to major reversals in other markets
Currently the top has formed in USDJPY
“The analysis from the previous week has not changed, in fact the outlook improved in favour of a major reversal. This week speculators left their longs unchanged but added fresh 8.7K longs. In normal circumstances, this would be very USDJPY bullish but, this week smart money is extremely over-stretched from all angles. This week’s adjustments made them 127K net shorts – all-time high. They held 63.3% of the total open interest in longs – very high share of Open Interest. Open Interes came out at 287K – also all-time high
This combined with the technical resistance and the daily pin bar gives enough reasons to short USDJPY and other JPY crosses. Top is near”
Since then the pair moved from 114.50 top to 112.50 and its just beginning its downtrend.
Don’t ignore Speculators always read COT
It will pay you back!