CFTC Commitments of Traders (COT) Report, 23 October 2012 Technical Analysis. The total net spec positions of the currencies we follow reduced their net short to 91,210 contracts, down from 152,994 in the prior week. The biggest position shift was in the yen where specs were sellers of 44.2K. Some of this selling may have been in anticipation of a loosening of Bank of Japan monetary policy. Since the release of the report, the yen bears have not fared that well.

The activity in the pound is also interesting. The small spec had been building a sizable long, but the market stalled and then slipped below the 1.60 handle where it would appear, they blew their positions.

Speculators continue to favour the commodity currencies, the Canadian, New Zealand, and the Australian Dollars. Their biggest position has been in the Canadian, where the net spec long position has exceeded 100K contracts since the second week in September. In the most recent COT report, the long has come down but remains at almost 111K. The large spec - probably funds - is still a 12.75 ratio long.

Since the cut-off for this report, when the C$ was .9923, the loonie has weakened past parity with the USD. Currently the currency is trading on the 200 day SMA of .9993. Settlement above this level will like result in more selling.

US Dollar Index: Large specs increased their net short position in the DI by over 1200 contracts during the period. Small specs, though not big participants in this contract, remain long the DI. Neither spec group has a strong commitment to their positions.

Euro (EUR/USD): There were only nominal changes in positions during the period. Both the large specs and the small specs remain short the euro. The large spec is a 2.5 ratio short, a small increase from the prior week as they increased their net position. The spreading which is mostly option trade is large, 9.8% of the 260K total open position.

British Pound Sterling (GBP/USD): Small specs were active during the period in this market as they reduced their net long position in the pound by 14.7K contracts. The total spec net long was down 15.1K, so this shows the large spec did not make any significant changes in his position. The pound sold off during the period, trading under 1.59 which suggests small spec liquidation may have been the cause.

Japanese Yen (JPY/USD): There was a large increase in the spec short position. Large specs decisively got short. They changed their net position by over 28K contracts flipping to the short side of the yen. Small specs added to their short position and are now better than a 3 ratio short. There had been consistent selling of the yen which weakened the yen to more than 80 to the USD in anticipation of the Bank of Japans new efforts to weaken the yen with monetary policy.

Swiss Franc (CHF/USD): Traders have been reluctant to take big positions or trade the SF actively after the intervention by the SNB. The total OI is less than 40K, and both size specs have assumed modest long positions. Collectively the small specs have bigger positions in the SF than the large specs. They did increase their long position by 2.7K contracts.

Canadian Dollar (CAD/USD): Despite persistent weakness in the C$, the specs were still big longs in the loonie at the close of this report. The total long did come down, but remains a hefty 110.8K. Large specs were a 12.75 ratio long and the small specs were a 2 to 1 long. Since the end of the report period, the C$ did slip below parity with the USD so we can assume more longs liquidated.

New Zealand Dollar (NZD/USD): The large spec remains a big long in this small market, by a 5 to 1 ratio. Small specs with a 2 to 1 long are not so aggressive, and the small spec made a modest reduction in their long. Recent market action has not helped the longs.

Australian Dollar (AUD/USD): After several weeks of long liquidation in the A$ by the large specs, they returned to the buy side in the most recent period. They are now slightly better than a 2 ratio long. Small specs are also long, but only by about 2.5K contracts. Recently the market has been quiet and moving sideways.

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