The following is a brief excerpt from our September Investor Sentiment Survey report.
In includes our analysis of a broad list of both asset flow- and survey-based measures of professional and retail investor sentiment, which focuses on their directional implications for the major areas of the US financial markets including the US stock market, US interest rates, the US Dollar, and commodity prices including copper, crude oil, and gold.
This chart measures investor sentiment on the US currency according to current net positioning by commercial hedgers in the CME euro contract via the Commitments of Traders data, which is compiled and published weekly by the Commodity Futures Trading Commission (CFTC). According to the CFTC, commercials are professional entities, often money center banks, that are holding large positions in the futures market to hedge their physical currency holdings in global currencies including the euro.
The highlighted area in the upper panel of the chart shows that these hedgers, who typically accumulate a net position against the trend, are holding a near-record net long (bullish) position on the euro. The green vertical highlights between both panels show that similar or lesser most bullish extremes by these “smart money” hedgers have coincided with or closely led every major bottom in the euro, and coincident top in the US Dollar, during the past decade.
John Kosar
