Steven Mylonas
Bottomcatcher.com
The USD/CHF currency pair has been range-bound since early 2015 (A) and now trading below its 200 period moving average across all time frames looks to be within spitting distance of retesting strong channel support as it did back in early March of this year (9182.3).
So What?
Well, what’s interesting this week is the fundamental data released by the Commitment of Traders report (COT) which covers positions held by three groups of traders (Commercials, Non-Commercials and Small speculators) from Tuesday’s settlement through to Friday. Non Commercials (large speculators, funds etc) reduced their bearish net positions in the Dollar (USD) totalling a net position of -4,975 contracts, a change of 339 contracts from the previous week which had a total of -5,314 net contracts. So that was a slight change, but a change nonetheless.
On the Swiss Franc (CHF) speculators last week held a net position of 4,338 contracts up from the previous week by 2,890 contracts. But what caught our attention is what exposure the Commercial Hedgers (commonly known as the Smart Money hedgers) have. Last week they established a multi-year short position on the Swiss Franc totalling -8910.00 contracts, which is considered extreme, last seen in April 2016 and before that, May 2015. And on the US Dollar their net long 4998.00 contracts which is just a shade below the 5,199 contacts they held back in November 2017, In other words, they’re very bullish on the Dollar and very very bearish on the Swiss Franc.
We like to focus on the Smart Money as they tend to drive the markets ‘WHEN’ they reach an extreme. Our studies suggest on average when the Smart Money hedgers reach an extreme a turning point could occur a few weeks down the line, which ties in nicely with the chart. Providing the Smart Money holds this kind of exposure on the Dollar and in particular, the Swiss Franc, coupled with the strong support that awaits at the bottom of the range-bound channel (A) we could expect to see a change in direction to the upside. Definitely one for the watchlist.
Bottomcatcher has made every attempt to ensure the accuracy and reliability of the information provided in this report. However, the information is provided without a warranty of any kind. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Bottomcatcher.
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