A sense of anticipation gripped financial markets today as investors prepared for the US inflation data on Thursday.
Market players remain hopeful that inflation may have cooled further in December and this seems to be supporting global equity markets. In the currency space, the dollar remains firm while gold has struggled to conquer the $1880 resistance level. With less than 24 hours until the key US inflation report is published, markets may remain on standby waiting for a fundamental spark. Despite the expected lack of action over the next few hours, this period of calm could help identify some potential opportunities before the CPI storm!
EURUSD waiting for softer USD?
This currency pair remains firmly bullish on the daily timeframe as there have been consistently higher highs and higher lows. Prices are trading above the 50, 100, and 200-day SMA while the MACD trades above zero. The recent breakout above 1.0700 could signal further upside with 1.0770 with 1.0900 acting as key levels of interest. Should prices slip back under 1.0700, the currency pair could experience a selloff towards 1.0505.
GBPUSD trapped within a range
It seems like the GBPUSD remains trapped within a very wide range on the daily charts. Support can be found at 1.1900 and resistance at 1.2210. A potent fundamental spark may be needed for the currency pair to resume the uptrend or experience a reversal lower. The pending US inflation report could inject fresh life into the GBPUSD, with a softer inflation report favour GBPUSD bulls. Looking at the technical picture, a strong breakout above 1.2210 may signal an incline toward 1.2300 and 1.2460, respectively.
USDJPY breakout on horizon
As the subtitle says, the USDJPY could be gearing up for a breakout. Prices remain trapped within a 450 range with bulls and bears waiting for a direction catalyst. This may come in the form of the pending US inflation data which may determine the USDJPY’s short-term outlook. A solid breakout and daily close below 130.00 could signal a selloff towards 127.00. Should prices push back above 134.50, the next key level of interest can be found at 138.00.
From steam power and electricity to computers and the internet, technological advancements have always disrupted labor markets, pushing out some jobs while creating others. Artificial intelligence remains something of a misnomer – the smartest computer systems still don’t actually know anything – but the technology has reached an inflection point where it’s poised to affect new classes of jobs: artists and knowledge workers.
Specifically, the emergence of large language models – AI systems that are trained on vast amounts of text – means computers can now produce human-sounding written language and convert descriptive phrases into realistic images. The Conversation asked five artificial intelligence researchers to discuss how large language models are likely to affect artists and knowledge workers. And, as our experts noted, the technology is far from perfect, which raises a host of issues – from misinformation to plagiarism – that affect human workers.
To jump ahead to each response, here’s a list of each:
Lynne Parker, Associate Vice Chancellor, University of Tennessee
Large language models are making creativity and knowledge work accessible to all. Everyone with an internet connection can now use tools like ChatGPT or DALL-E 2 to express themselves and make sense of huge stores of information by, for example, producing text summaries.
These new AI tools can’t read minds, of course. A new, yet simpler, kind of human creativity is needed in the form of text prompts to get the results the human user is seeking. Through iterative prompting – an example of human-AI collaboration – the AI system generates successive rounds of outputs until the human writing the prompts is satisfied with the results. For example, the (human) winner of the recent Colorado State Fair competition in the digital artist category, who used an AI-powered tool, demonstrated creativity, but not of the sort that requires brushes and an eye for color and texture.
While there are significant benefits to opening the world of creativity and knowledge work to everyone, these new AI tools also have downsides. First, they could accelerate the loss of important human skills that will remain important in the coming years, especially writing skills. Educational institutes need to craft and enforce policies on allowable uses of large language models to ensure fair play and desirable learning outcomes.
Educators are preparing for a world where students have ready access to AI-powered text generators.
Second, these AI tools raise questions around intellectual property protections. While human creators are regularly inspired by existing artifacts in the world, including architecture and the writings, music and paintings of others, there are unanswered questions on the proper and fair use by large language models of copyrighted or open-source training examples. Ongoing lawsuits are now debating this issue, which may have implications for the future design and use of large language models.
As society navigates the implications of these new AI tools, the public seems ready to embrace them. The chatbot ChatGPT went viral quickly, as did image generator Dall-E mini and others. This suggests a huge untapped potential for creativity, and the importance of making creative and knowledge work accessible to all.
Potential inaccuracies, biases and plagiarism
Daniel Acuña, Associate Professor of Computer Science, University of Colorado Boulder
I am a regular user of GitHub Copilot, a tool for helping people write computer code, and I’ve spent countless hours playing with ChatGPT and similar tools for AI-generated text. In my experience, these tools are good at exploring ideas that I haven’t thought about before.
I’ve been impressed by the models’ capacity to translate my instructions into coherent text or code. They are useful for discovering new ways to improve the flow of my ideas, or creating solutions with software packages that I didn’t know existed. Once I see what these tools generate, I can evaluate their quality and edit heavily. Overall, I think they raise the bar on what is considered creative.
But I have several reservations.
One set of problems is their inaccuracies – small and big. With Copilot and ChatGPT, I am constantly looking for whether ideas are too shallow – for example, text without much substance or inefficient code, or output that is just plain wrong, such as wrong analogies or conclusions, or code that doesn’t run. If users are not critical of what these tools produce, the tools are potentially harmful.
Another problem is biases. Language models can learn from the data’s biases and replicate them. These biases are hard to see in text generation but very clear in image generation models. Researchers at OpenAI, creators of ChatGPT, have been relatively careful about what the model will respond to, but users routinely find ways around these guardrails.
Plagiarism is easier to see in images than in text. Is ChatGPT paraphrasing as well? Somepalli, G., et al., CC BY
These tools are in their infancy, given their potential. For now, I believe there are solutions to their current limitations. For example, tools could fact-check generated text against knowledge bases, use updated methods to detect and remove biases from large language models, and run results through more sophisticated plagiarism detection tools.
With humans surpassed, niche and ‘handmade’ jobs will remain
Kentaro Toyama, Professor of Community Information, University of Michigan
We human beings love to believe in our specialness, but science and technology have repeatedly proved this conviction wrong. People once thought that humans were the only animals to use tools, to form teams or to propagate culture, but science has shown that other animals do each of thesethings.
Meanwhile, technology has quashed, one by one, claims that cognitive tasks require a human brain. The first adding machine was invented in 1623. This past year, a computer-generated work won an art contest. I believe that the singularity – the moment when computers meet and exceed human intelligence – is on the horizon.
How will human intelligence and creativity be valued when machines become smarter and more creative than the brightest people? There will likely be a continuum. In some domains, people still value humans doing things, even if a computer can do it better. It’s been a quarter of a century since IBM’s Deep Blue beat world champion Garry Kasparov, but human chess – with all its drama – hasn’t gone away.
In other domains, human skill will seem costly and extraneous. Take illustration, for example. For the most part, readers don’t care whether the graphic accompanying a magazine article was drawn by a person or a computer – they just want it to be relevant, new and perhaps entertaining. If a computer can draw well, do readers care whether the credit line says Mary Chen or System X? Illustrators would, but readers might not even notice.
And, of course, this question isn’t black or white. Many fields will be a hybrid, where some Homo sapiens find a lucky niche, but most of the work is done by computers. Think manufacturing – much of it today is accomplished by robots, but some people oversee the machines, and there remains a market for handmade products.
If history is any guide, it’s almost certain that advances in AI will cause more jobs to vanish, that creative-class people with human-only skills will become richer but fewer in number, and that those who own creative technology will become the new mega-rich. If there’s a silver lining, it might be that when even more people are without a decent livelihood, people might muster the political will to contain runaway inequality.
Old jobs will go, new jobs will emerge
Mark Finlayson, Associate Professor of Computer Science, Florida International University
Large language models are sophisticated sequence completion machines: Give one a sequence of words (“I would like to eat an …”) and it will return likely completions (“… apple.”). Large language models like ChatGPT that have been trained on record-breaking numbers of words (trillions) have surprised many, including many AI researchers, with how realistic, extensive, flexible and context-sensitive their completions are.
Like any powerful new technology that automates a skill – in this case, the generation of coherent, albeit somewhat generic, text – it will affect those who offer that skill in the marketplace. To conceive of what might happen, it is useful to recall the impact of the introduction of word processing programs in the early 1980s. Certain jobs like typist almost completely disappeared. But, on the upside, anyone with a personal computer was able to generate well-typeset documents with ease, broadly increasing productivity.
Further, new jobs and skills appeared that were previously unimagined, like the oft-included resume item MS Office. And the market for high-end document production remained, becoming much more capable, sophisticated and specialized.
I think this same pattern will almost certainly hold for large language models: There will no longer be a need for you to ask other people to draft coherent, generic text. On the other hand, large language models will enable new ways of working, and also lead to new and as yet unimagined jobs.
To see this, consider just three aspects where large language models fall short. First, it can take quite a bit of (human) cleverness to craft a prompt that gets the desired output. Minor changes in the prompt can result in a major change in the output.
Second, large language models can generate inappropriate or nonsensical output without warning.
These failings are opportunities for creative and knowledge workers. For much content creation, even for general audiences, people will still need the judgment of human creative and knowledge workers to prompt, guide, collate, curate, edit and especially augment machines’ output. Many types of specialized and highly technical language will remain out of reach of machines for the foreseeable future. And there will be new types of work – for example, those who will make a business out of fine-tuning in-house large language models to generate certain specialized types of text to serve particular markets.
In sum, although large language models certainly portend disruption for creative and knowledge workers, there are still many valuable opportunities in the offing for those willing to adapt to and integrate these powerful new tools.
Leaps in technology lead to new skills
Casey Greene, Professor of Biomedical Informatics, University of Colorado Anschutz Medical Campus
Technology changes the nature of work, and knowledge work is no different. The past two decades have seen biology and medicine undergoing transformation by rapidly advancing molecular characterization, such as fast, inexpensive DNA sequencing, and the digitization of medicine in the form of apps, telemedicine and data analysis.
Some steps in technology feel larger than others. Yahoo deployed human curators to index emerging content during the dawn of the World Wide Web. The advent of algorithms that used information embedded in the linking patterns of the web to prioritize results radically altered the landscape of search, transforming how people gather information today.
Just as the skills for finding information on the internet changed with the advent of Google, the skills necessary to draw the best output from language models will center on creating prompts and prompt templates that produce desired outputs.
For the cover letter example, multiple prompts are possible. “Write a cover letter for a job” would produce a more generic output than “Write a cover letter for a position as a data entry specialist.” The user could craft even more specific prompts by pasting portions of the job description, resume and specific instructions – for example, “highlight attention to detail.”
As with many technological advances, how people interact with the world will change in the era of widely accessible AI models. The question is whether society will use this moment to advance equity or exacerbate disparities.
Economic ‘peak opportunity’ is likely to be late Quarter 1 for most major developed economies, and when investors might be rewarded for taking the plunge, predicts the CEO and founder of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The prediction from deVere Group’s Nigel Green comes as global investors review their portfolios with their advisers for the year ahead.
He says: “Economic ‘peak opportunity’ might come late in the first quarter.
“Until then, unemployment will be rising and there will still be aggressive language from the central banks on the need to stamp out inflation – which by then will be sharply down from current levels, especially as demand for staff is falling fast and this will help ease wage inflation, but it will still be well above the 2% target set by the central banks.
“This is, perhaps, when stocks will reach their cyclical bottom, and when investors might be rewarded for taking the plunge.”
The second quarter of the year might see risk assets start to price in a cyclical upturn in the G7 economies.
“The assets that have fallen hardest between now and then may be the strongest performers during this recovery rally, with the best performing days probably at the start,” noted Nigel Green.
“There will be cyclically-sensitive sectors, such as industrials, consumer discretionary and autos.”
What might trigger this recovery? “Probably central banks’ ending of rate hikes, and easing of rhetoric on inflation, as it slowly makes its way down to the 2% target rate in the major western economies, companies cutting back fast, together with signs of economic stabilisation.”
Investors should remain diversified, affirms the CEO of deVere. There is no ‘right way’ to approach investing, since each individual’s attitude to risk, and time horizon, differs. However, a disciplined approach to putting money into the markets, that ignores current trends, when the outlook for corporate earnings and interest rates is so opaque. Investors should remain diversified in multi-asset portfolios, that offer exposure to equities, bonds and alternative asset classes.
“Holding cash is tempting, but it suggests an ability to ‘time the market’, to invest it at an optimum point in the cycle, and this is nearly always impossible. Investors should be starting to position themselves for the cyclical upturn,” he concludes.
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
Gold is certainly glittering, gaining 2.3% in the first full trading week of 2023 alone.
The precious metal continues to draw ample strength from a softer dollar, falling Treasury yields, and growing expectations of a less hawkish Federal Reserve. Last Friday’s mixed US jobs report added fuel to the bullish momentum, resulting in a weekly close above resistance at $1860.
In our 2023 outlook, we discussed how gold could be one of the biggest winners in 2023 due to the shifting market dynamics and fundamental themes. Well, it looks like bulls are wasting no time in our marking their territory, pushing the precious metal to levels not seen since May 2022.
Regarding December’s jobs data, it offered conflicting signals as NFP exceeded expectations by rising 223,000k but wage growth slowed, and weekly working hours continued to fall. The slowing wage growth fuelled speculation around the Fed slowing its rate hikes – dealing a blow to the dollar which was already on the verge of a “death cross” technical pattern on the daily charts. Ultimately, this was a welcome development for zero-yielding gold.
Taking a quick peek at the technical picture, gold remains firmly bullish on the daily timeframe. The upside momentum could propel prices towards the psychological $1900 if the fundamentals remain in favour of bulls.
US Inflation report in focus
Inflation in the United States slowed for a fifth straight month to 7.1% in November, the lowest level since December 2021. Persistent signs of easing inflationary pressures in the world’s largest economy have somewhat brightened the market mood and fuelled speculation around a less hawkish Fed.
According to Bloomberg, December’s inflation data is expected to show annual inflation cooling to 6.5%. Should expectations become reality, this will mark the sixth straight monthly decline and the lowest since October 2021. Given the market sensitivity to anything relating to inflation, this could result in explosive levels of volatility across financial markets.
More signs of falling inflation may fuel talks around the Federal Reserve veering to smaller rate hikes. Currently, traders are currently pricing in a 27% probability of a 50-basis point rate hike in February. When considering gold’s zero-yielding nature, this is certainly a welcome development for the metal which could support upside gains.
Alternatively, a hotter-than-expected CPI report could revive aggressive rate hike bets as investors question whether inflation is plateauing. Such a development could see gold prices weaken as the dollar bounces back along with Treasury yields.
Other factors to watch out for…
Other than the highly anticipated US CPI report on Thursday, there are a couple of reports and Fed speeches this week that could influence gold prices.
On Monday, Atlanta Fed President Raphael Bostic will be under the spotlight. All eyes will be on Fed Chair Jerome Powell on Tuesday as he speaks during an international symposium at Riksbank in Stockholm. More Fed members are due to speak on Thursday with the US January consumer sentiment report on Friday ending the week. Should Fed members strike a hawkish note, this could weigh on gold prices. Alternatively, any whiff of caution or appearance of doves may boost gold’s allure.
Gold bulls switch into higher gear…
Gold bulls remain in a position of power with their feet pressed aggressively on the accelerator. Prices are firmly bullish on the daily timeframe with $1900 acting as the first key level of interest. A move above this level could encourage an incline towards $1920 and $1958, respectively. Should bulls run out of steam, prices may dip back below $1860 – opening the doors towards $1840, $1814, and $1800, respectively.
Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).
The latest COT data is updated through Tuesday January 3rd and shows a quick view of how large market participants (for-profit speculators and commercial traders) were positioned in the futures markets. All currency positions are in direct relation to the US dollar where, for example, a bet for the euro is a bet that the euro will rise versus the dollar while a bet against the euro will be a bet that the euro will decline versus the dollar.
Weekly Speculator Changes led by the Brazilian Real & Canadian Dollar
The COT currency market speculator bets were higher this week as six out of the eleven currency markets we cover had higher positioning while the other five markets had lower speculator contracts.
Leading the gains for the currency markets was the Brazilian Real (20,796 contracts) with the Canadian Dollar (3,267 contracts), the Swiss Franc (1,277 contracts), the US Dollar Index (820 contracts), New Zealand Dollar (573 contracts) and the Australian Dollar (524 contracts) also having positive weeks.
The currencies seeing declines in speculator bets on the week were the EuroFX (-16,247 contracts) with the British Pound (-9,414 contracts), Japanese Yen (-9,134 contracts), Mexican Peso (-4,650 contracts) and Bitcoin (-304 contracts) also registering lower bets on the week.
Highlighting the COT currencies data is this week’s breather in the highly bullish Euro currency speculator positioning. The large speculator bets for the Euro dropped this week by the most in the past twenty-four weeks. This week’s shortfall, however, follows a strong bullish run that had seen positions rise in fourteen out of the previous seventeen weeks, going from a total of -47,676 contracts on August 30th to a new 100-week high last week at a total of +146,621 contracts and the highest since January of 2021. Despite this week’s decline, the Euro positions have now been above +100,000 contracts for the past ten weeks which marks the best run since 2021.
The Euro price has been in an uptrend since bottoming in September and has shot higher against the US Dollar since US inflationary data has started to cool. The Euro/US Dollar exchange rate closed just below the 1.0700 level this week after having been right at parity (1.0000) as recently as November 22nd.
COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Bitcoin (84 percent) and the Brazilian Real (76 percent) lead the currency markets this week. The EuroFX (75 percent), New Zealand Dollar (74 percent) and the US Dollar Index (55 percent) come in as the next highest in the weekly strength scores.
On the downside, the Mexican Peso (3 percent) and the Canadian Dollar (10 percent) come in at the lowest strength levels currently and are in Extreme-Bearish territory (below 20 percent). The next lowest strength scores are the Japanese Yen (40 percent) and the Swiss Franc (47 percent).
Strength Statistics: US Dollar Index (54.6 percent) vs US Dollar Index previous week (53.2 percent) EuroFX (74.9 percent) vs EuroFX previous week (79.9 percent) British Pound Sterling (51.6 percent) vs British Pound Sterling previous week (59.7 percent) Japanese Yen (40.0 percent) vs Japanese Yen previous week (45.6 percent) Swiss Franc (47.1 percent) vs Swiss Franc previous week (43.7 percent) Canadian Dollar (9.9 percent) vs Canadian Dollar previous week (6.0 percent) Australian Dollar (51.2 percent) vs Australian Dollar previous week (50.7 percent) New Zealand Dollar (74.2 percent) vs New Zealand Dollar previous week (72.7 percent) Mexican Peso (3.3 percent) vs Mexican Peso previous week (5.3 percent) Brazilian Real (76.1 percent) vs Brazilian Real previous week (53.9 percent) Bitcoin (83.7 percent) vs Bitcoin previous week (89.0 percent)
Swiss Franc & New Zealand Dollar top the 6-Week Strength Trends
COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that the Swiss Franc (31 percent) and the New Zealand Dollar (31 percent) lead the past six weeks trends for the currencies. The Brazilian Real (21 percent), the British Pound (13 percent) and the Japanese Yen (11 percent) are the next highest positive movers in the latest trends data.
The Mexican Peso (-51 percent) leads the downside trend scores currently with the Canadian Dollar (-18 percent), US Dollar Index (-11 percent) and Bitcoin (-6 percent) following next with lower trend scores.
Strength Trend Statistics: US Dollar Index (-10.5 percent) vs US Dollar Index previous week (-16.5 percent) EuroFX (2.1 percent) vs EuroFX previous week (10.3 percent) British Pound Sterling (13.4 percent) vs British Pound Sterling previous week (18.8 percent) Japanese Yen (11.1 percent) vs Japanese Yen previous week (17.3 percent) Swiss Franc (30.7 percent) vs Swiss Franc previous week (33.6 percent) Canadian Dollar (-18.0 percent) vs Canadian Dollar previous week (-20.4 percent) Australian Dollar (6.0 percent) vs Australian Dollar previous week (7.4 percent) New Zealand Dollar (31.5 percent) vs New Zealand Dollar previous week (36.2 percent) Mexican Peso (-51.0 percent) vs Mexican Peso previous week (-51.0 percent) Brazilian Real (20.9 percent) vs Brazilian Real previous week (-1.7 percent) Bitcoin (-5.5 percent) vs Bitcoin previous week (2.1 percent)
Individual COT Forex Markets:
US Dollar Index Futures:
The US Dollar Index large speculator standing this week resulted in a net position of 17,761 contracts in the data reported through Tuesday. This was a weekly lift of 820 contracts from the previous week which had a total of 16,941 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 54.6 percent. The commercials are Bearish with a score of 43.7 percent and the small traders (not shown in chart) are Bearish with a score of 43.2 percent.
US DOLLAR INDEX Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
79.3
3.8
13.2
– Percent of Open Interest Shorts:
36.8
52.1
7.4
– Net Position:
17,761
-20,204
2,443
– Gross Longs:
33,171
1,588
5,538
– Gross Shorts:
15,410
21,792
3,095
– Long to Short Ratio:
2.2 to 1
0.1 to 1
1.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
54.6
43.7
43.2
– Strength Index Reading (3 Year Range):
Bullish
Bearish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
-10.5
12.3
-15.8
Euro Currency Futures:
The Euro Currency large speculator standing this week resulted in a net position of 129,915 contracts in the data reported through Tuesday. This was a weekly decline of -16,247 contracts from the previous week which had a total of 146,162 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 74.9 percent. The commercials are Bearish with a score of 26.6 percent and the small traders (not shown in chart) are Bearish with a score of 49.4 percent.
EURO Currency Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
31.3
54.8
12.0
– Percent of Open Interest Shorts:
13.0
79.2
5.8
– Net Position:
129,915
-174,081
44,166
– Gross Longs:
222,543
389,861
85,209
– Gross Shorts:
92,628
563,942
41,043
– Long to Short Ratio:
2.4 to 1
0.7 to 1
2.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
74.9
26.6
49.4
– Strength Index Reading (3 Year Range):
Bullish
Bearish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
2.1
-4.6
14.9
British Pound Sterling Futures:
The British Pound Sterling large speculator standing this week resulted in a net position of -20,301 contracts in the data reported through Tuesday. This was a weekly reduction of -9,414 contracts from the previous week which had a total of -10,887 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.6 percent. The commercials are Bullish with a score of 54.3 percent and the small traders (not shown in chart) are Bearish with a score of 39.6 percent.
BRITISH POUND Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
21.2
65.8
10.8
– Percent of Open Interest Shorts:
31.1
51.3
15.3
– Net Position:
-20,301
29,692
-9,391
– Gross Longs:
43,625
135,314
22,168
– Gross Shorts:
63,926
105,622
31,559
– Long to Short Ratio:
0.7 to 1
1.3 to 1
0.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
51.6
54.3
39.6
– Strength Index Reading (3 Year Range):
Bullish
Bullish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
13.4
-14.8
12.1
Japanese Yen Futures:
The Japanese Yen large speculator standing this week resulted in a net position of -46,864 contracts in the data reported through Tuesday. This was a weekly lowering of -9,134 contracts from the previous week which had a total of -37,730 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 40.0 percent. The commercials are Bullish with a score of 58.5 percent and the small traders (not shown in chart) are Bullish with a score of 53.6 percent.
JAPANESE YEN Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
14.7
68.3
15.8
– Percent of Open Interest Shorts:
41.9
41.2
15.7
– Net Position:
-46,864
46,773
91
– Gross Longs:
25,377
117,959
27,267
– Gross Shorts:
72,241
71,186
27,176
– Long to Short Ratio:
0.4 to 1
1.7 to 1
1.0 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
40.0
58.5
53.6
– Strength Index Reading (3 Year Range):
Bearish
Bullish
Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
11.1
-15.3
27.1
Swiss Franc Futures:
The Swiss Franc large speculator standing this week resulted in a net position of -2,854 contracts in the data reported through Tuesday. This was a weekly gain of 1,277 contracts from the previous week which had a total of -4,131 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 47.1 percent. The commercials are Bullish with a score of 55.6 percent and the small traders (not shown in chart) are Bearish with a score of 45.4 percent.
SWISS FRANC Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
19.9
48.9
31.0
– Percent of Open Interest Shorts:
28.5
29.6
41.8
– Net Position:
-2,854
6,431
-3,577
– Gross Longs:
6,632
16,274
10,322
– Gross Shorts:
9,486
9,843
13,899
– Long to Short Ratio:
0.7 to 1
1.7 to 1
0.7 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
47.1
55.6
45.4
– Strength Index Reading (3 Year Range):
Bearish
Bullish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
30.7
-21.1
3.9
Canadian Dollar Futures:
The Canadian Dollar large speculator standing this week resulted in a net position of -26,766 contracts in the data reported through Tuesday. This was a weekly lift of 3,267 contracts from the previous week which had a total of -30,033 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 9.9 percent. The commercials are Bullish-Extreme with a score of 89.2 percent and the small traders (not shown in chart) are Bearish with a score of 34.6 percent.
CANADIAN DOLLAR Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
18.3
55.8
22.9
– Percent of Open Interest Shorts:
37.6
38.2
21.3
– Net Position:
-26,766
24,541
2,225
– Gross Longs:
25,497
77,624
31,870
– Gross Shorts:
52,263
53,083
29,645
– Long to Short Ratio:
0.5 to 1
1.5 to 1
1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
9.9
89.2
34.6
– Strength Index Reading (3 Year Range):
Bearish-Extreme
Bullish-Extreme
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
-18.0
9.9
6.5
Australian Dollar Futures:
The Australian Dollar large speculator standing this week resulted in a net position of -36,267 contracts in the data reported through Tuesday. This was a weekly gain of 524 contracts from the previous week which had a total of -36,791 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 51.2 percent. The commercials are Bearish with a score of 48.4 percent and the small traders (not shown in chart) are Bearish with a score of 44.3 percent.
AUSTRALIAN DOLLAR Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
26.5
56.2
13.4
– Percent of Open Interest Shorts:
53.8
26.4
15.9
– Net Position:
-36,267
39,595
-3,328
– Gross Longs:
35,208
74,724
17,847
– Gross Shorts:
71,475
35,129
21,175
– Long to Short Ratio:
0.5 to 1
2.1 to 1
0.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
51.2
48.4
44.3
– Strength Index Reading (3 Year Range):
Bullish
Bearish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
6.0
-7.8
9.5
New Zealand Dollar Futures:
The New Zealand Dollar large speculator standing this week resulted in a net position of 7,480 contracts in the data reported through Tuesday. This was a weekly advance of 573 contracts from the previous week which had a total of 6,907 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 74.2 percent. The commercials are Bearish with a score of 27.2 percent and the small traders (not shown in chart) are Bullish with a score of 59.6 percent.
NEW ZEALAND DOLLAR Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
44.9
41.6
12.9
– Percent of Open Interest Shorts:
19.8
69.0
10.6
– Net Position:
7,480
-8,170
690
– Gross Longs:
13,366
12,378
3,842
– Gross Shorts:
5,886
20,548
3,152
– Long to Short Ratio:
2.3 to 1
0.6 to 1
1.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
74.2
27.2
59.6
– Strength Index Reading (3 Year Range):
Bullish
Bearish
Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
31.5
-31.2
16.9
Mexican Peso Futures:
The Mexican Peso large speculator standing this week resulted in a net position of -56,376 contracts in the data reported through Tuesday. This was a weekly decline of -4,650 contracts from the previous week which had a total of -51,726 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 3.3 percent. The commercials are Bullish-Extreme with a score of 93.8 percent and the small traders (not shown in chart) are Bullish-Extreme with a score of 93.6 percent.
MEXICAN PESO Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
53.5
43.0
3.3
– Percent of Open Interest Shorts:
76.6
22.5
0.8
– Net Position:
-56,376
50,262
6,114
– Gross Longs:
131,201
105,401
8,078
– Gross Shorts:
187,577
55,139
1,964
– Long to Short Ratio:
0.7 to 1
1.9 to 1
4.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
3.3
93.8
93.6
– Strength Index Reading (3 Year Range):
Bearish-Extreme
Bullish-Extreme
Bullish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
-51.0
50.2
-3.6
Brazilian Real Futures:
The Brazilian Real large speculator standing this week resulted in a net position of 28,211 contracts in the data reported through Tuesday. This was a weekly rise of 20,796 contracts from the previous week which had a total of 7,415 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 76.1 percent. The commercials are Bearish with a score of 24.0 percent and the small traders (not shown in chart) are Bullish with a score of 78.1 percent.
BRAZIL REAL Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
84.5
7.3
8.2
– Percent of Open Interest Shorts:
10.3
85.4
4.4
– Net Position:
28,211
-29,648
1,437
– Gross Longs:
32,105
2,779
3,096
– Gross Shorts:
3,894
32,427
1,659
– Long to Short Ratio:
8.2 to 1
0.1 to 1
1.9 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
76.1
24.0
78.1
– Strength Index Reading (3 Year Range):
Bullish
Bearish
Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
20.9
-20.4
-0.2
Bitcoin Futures:
The Bitcoin large speculator standing this week resulted in a net position of 389 contracts in the data reported through Tuesday. This was a weekly fall of -304 contracts from the previous week which had a total of 693 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish-Extreme with a score of 83.7 percent. The commercials are Bearish with a score of 36.4 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 17.2 percent.
BITCOIN Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
80.8
0.5
7.6
– Percent of Open Interest Shorts:
78.2
4.5
6.3
– Net Position:
389
-578
189
– Gross Longs:
11,747
73
1,103
– Gross Shorts:
11,358
651
914
– Long to Short Ratio:
1.0 to 1
0.1 to 1
1.2 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
83.7
36.4
17.2
– Strength Index Reading (3 Year Range):
Bullish-Extreme
Bearish
Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
-5.5
21.0
-2.6
Article By InvestMacro – Receive our weekly COT Newsletter
*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.
The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.
The latest update for the weekly Commitment of Traders (COT) report was released by the Commodity Futures Trading Commission (CFTC) on Friday for data ending on January 3rd.
This weekly Extreme Positions report highlights the Most Bullish and Most Bearish Positions for the speculator category. Extreme positioning in these markets can foreshadow strong moves in the underlying market.
To signify an extreme position, we use the Strength Index (also known as the COT Index) of each instrument, a common method of measuring COT data. The Strength Index is simply a comparison of current trader positions against the range of positions over the previous 3 years. We use over 80 percent as extremely bullish and under 20 percent as extremely bearish. (Compare Strength Index scores across all markets in the data table or cot leaders table)
Here Are This Week’s Most Bullish Speculator Positions:
Soybean Meal
The Soybean Meal speculator position comes in as the most bullish extreme standing this week. The Soybean Meal speculator level is currently at a 100.0 percent score of its 3-year range.
The Bloomberg Commodity Index speculator position comes next in the extreme standings this week. The Bloomberg Commodity Index speculator level is now at a 91.0 percent score of its 3-year range.
The six-week trend for the percent strength score was a small gain of 2.2 this week. The speculator position registered -4,301 net contracts this week with a weekly decline of -980 contracts in speculator bets.
Bitcoin
The Bitcoin speculator position comes in third this week in the extreme standings. The Bitcoin speculator level resides at a 83.7 percent score of its 3-year range.
The six-week trend for the speculator strength score came in at -5.5 this week. The speculator position was 389 net contracts this week with a change of -304 contracts in this week’s speculator bets.
Brazil Real
The Brazil Real speculator position comes up number four in the extreme standings this week. The Brazil Real speculator level is at a 76.1 percent score of its 3-year range.
The six-week trend for the speculator strength score totaled a change of 20.9 this week. The speculator position was 28,211 net contracts this week with a rise by 20,796 contracts in this week’s speculator bets.
Nasdaq
The Nasdaq speculator position rounds out the top five in this week’s bullish extreme standings. The Nasdaq speculator level sits at a 75.8 percent score of its 3-year range.
The six-week trend for the speculator strength score was -0.9 this week. The speculator position was 1,362 net contracts this week with a small gain of 190 contracts in this week’s speculator bets.
This Week’s Most Bearish Speculator Positions:
Ultra 10-Year U.S. T-Note
The Ultra 10-Year U.S. T-Note speculator position comes in as the most bearish extreme standing this week. The Ultra 10-Year U.S. T-Note speculator level is at a 0.0 percent score of its 3-year range.
The six-week trend for the speculator strength score was -2.1 this week. The speculator position was -113,357 net contracts this week with a shortfall of -30,091 contracts in this week’s speculator bets.
Mexican Peso
The Mexican Peso speculator position comes in next for the most bearish extreme standing on the week. The Mexican Peso speculator level is at a 3.3 percent score of its 3-year range.
The six-week trend for the speculator strength score was -51.0 this week. The overall speculator position was -56,376 net contracts this week with a decrease of -4,650 contracts in this week’s speculator bets.
WTI Crude Oil
The WTI Crude Oil speculator position comes in as third most bearish extreme standing of the week. The WTI Crude Oil speculator level resides at a 4.5 percent score of its 3-year range.
The six-week trend for the speculator strength score was -6.6 this week. The speculator position was 227,607 net contracts this week with a drop by -20,011 contracts in this week’s speculator bets.
5-Year Bond
The 5-Year Bond speculator position comes in as this week’s fourth most bearish extreme standing. The 5-Year Bond speculator level is at a 4.9 percent score of its 3-year range.
The six-week trend for the speculator strength score was -16.4 this week. The overall speculator position was -652,919 net contracts this week with a small rise by 2,609 contracts in this week’s speculator bets.
Wheat
Finally, the Wheat speculator position comes in as the fifth most bearish extreme standing for this week. The Wheat speculator level is at a 7.5 percent score of its 3-year range.
The six-week trend for the speculator strength score was -4.7 this week. The speculator position was -32,291 net contracts this week with an increase by 3,998 contracts in this week’s speculator bets.
Speculators or Non-Commercials Notes:
Speculators, classified as non-commercial traders by the CFTC, are made up of large commodity funds, hedge funds and other significant for-profit participants. The Specs are generally regarded as trend-followers in their behavior towards price action – net speculator bets and prices tend to go in the same directions. These traders often look to buy when prices are rising and sell when prices are falling. To illustrate this point, many times speculator contracts can be found at their most extremes (bullish or bearish) when prices are also close to their highest or lowest levels.
These extreme levels can be dangerous for the large speculators as the trade is most crowded, there is less trading ammunition still sitting on the sidelines to push the trend further and prices have moved a significant distance. When the trend becomes exhausted, some speculators take profits while others look to also exit positions when prices fail to continue in the same direction. This process usually plays out over many months to years and can ultimately create a reverse effect where prices start to fall and speculators start a process of selling when prices are falling.
Article By InvestMacro – Receive our weekly COT Newsletter
*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.
The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.
Here are the latest charts and statistics for the Commitment of Traders (COT) data published by the Commodities Futures Trading Commission (CFTC).
The latest COT data is updated through Tuesday January 3rd and shows a quick view of how large traders (for-profit speculators and commercial entities) were positioned in the futures markets.
Weekly Speculator Changes led by Platinum & Gold
The COT metals markets speculator bets were lower this week as just two out of the five precious metals markets we cover had higher positioning while the other three markets had lower speculator contracts.
Leading the gains for the metals was Platinum (5,837 contracts) with Gold (4,786 contracts) also showing a positive week.
The markets with declines in speculator bets for the week were Copper (-5,399 contracts), Palladium (-336 contracts) and Silver (-93 contracts) registering lower bets on the week.
Highlighting the COT metals data this week is the continued gains in bets for the Platinum positions. The large speculator position in Platinum futures rose this week for a second straight week and for the fifth time over the past six weeks. Over the past fourteen weeks, Platinum bets have been higher in twelve of those weeks. The speculator position (sitting at +30,503 contracts) has now risen to the most bullish level since April 6th of 2021, a span of 91 weeks.
Platinum prices have been moving higher since hitting a multi-year low in early September as well. Since falling to a low just beneath $800 on September 1st, Platinum futures have been in a strong uptrend and closed this week above the $1100 price level for an almost 40 percent rise (since Sept. 1st) and the highest weekly close since March 2022.
Data Snapshot of Commodity Market Traders | Columns Legend
Jan-03-2023
OI
OI-Index
Spec-Net
Spec-Index
Com-Net
COM-Index
Smalls-Net
Smalls-Index
Gold
449,393
7
141,666
30
-159,974
70
18,308
26
Silver
131,990
9
30,934
48
-44,211
53
13,277
37
Copper
164,594
13
-4,675
33
-163
67
4,838
53
Palladium
8,456
12
-2,542
10
2,422
87
120
49
Platinum
69,687
38
30,503
50
-33,157
54
2,654
4
Strength Scores led by Platinum & Silver
COT Strength Scores (a normalized measure of Speculator positions over a 3-Year range, from 0 to 100 where above 80 is Extreme-Bullish and below 20 is Extreme-Bearish) showed that the Platinum (50 percent) leads the metals markets this week. Silver (48 percent) comes in as the next highest in the weekly strength scores.
On the downside, Palladium (10 percent) comes in at the lowest strength level currently and is in Extreme-Bearish territory (below 20 percent). The next lowest strength score was Gold (30 percent).
Strength Statistics: Gold (29.7 percent) vs Gold previous week (28.1 percent) Silver (48.2 percent) vs Silver previous week (48.3 percent) Copper (32.6 percent) vs Copper previous week (36.9 percent) Platinum (50.1 percent) vs Platinum previous week (42.3 percent) Palladium (9.8 percent) vs Palladium previous week (12.0 percent)
Silver & Platinum top the 6-Week Strength Trends
COT Strength Score Trends (or move index, calculates the 6-week changes in strength scores) showed that Silver (16 percent) leads the past six weeks trends for metals. Platinum (11 percent) is the next highest positive mover in the latest trends data.
Palladium (-9 percent) leads the downside trend scores currently with Copper (-6 percent) as the next market with lower trend scores.
Move Statistics: Gold (8.5 percent) vs Gold previous week (3.5 percent) Silver (15.6 percent) vs Silver previous week (14.8 percent) Copper (-6.2 percent) vs Copper previous week (-7.2 percent) Platinum (10.8 percent) vs Platinum previous week (2.9 percent) Palladium (-9.3 percent) vs Palladium previous week (-7.4 percent)
Individual Markets:
Gold Comex Futures:
The Gold Comex Futures large speculator standing this week was a net position of 141,666 contracts in the data reported through Tuesday. This was a weekly lift of 4,786 contracts from the previous week which had a total of 136,880 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 29.7 percent. The commercials are Bullish with a score of 69.8 percent and the small traders (not shown in chart) are Bearish with a score of 25.8 percent.
Gold Futures Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
51.4
25.3
9.4
– Percent of Open Interest Shorts:
19.8
60.9
5.3
– Net Position:
141,666
-159,974
18,308
– Gross Longs:
230,801
113,520
42,337
– Gross Shorts:
89,135
273,494
24,029
– Long to Short Ratio:
2.6 to 1
0.4 to 1
1.8 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
29.7
69.8
25.8
– Strength Index Reading (3 Year Range):
Bearish
Bullish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
8.5
-9.2
11.0
Silver Comex Futures:
The Silver Comex Futures large speculator standing this week was a net position of 30,934 contracts in the data reported through Tuesday. This was a weekly reduction of -93 contracts from the previous week which had a total of 31,027 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 48.2 percent. The commercials are Bullish with a score of 53.5 percent and the small traders (not shown in chart) are Bearish with a score of 36.5 percent.
Silver Futures Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
43.8
33.5
17.9
– Percent of Open Interest Shorts:
20.4
67.0
7.8
– Net Position:
30,934
-44,211
13,277
– Gross Longs:
57,801
44,229
23,576
– Gross Shorts:
26,867
88,440
10,299
– Long to Short Ratio:
2.2 to 1
0.5 to 1
2.3 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
48.2
53.5
36.5
– Strength Index Reading (3 Year Range):
Bearish
Bullish
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
15.6
-15.7
12.2
Copper Grade #1 Futures:
The Copper Grade #1 Futures large speculator standing this week was a net position of -4,675 contracts in the data reported through Tuesday. This was a weekly lowering of -5,399 contracts from the previous week which had a total of 724 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish with a score of 32.6 percent. The commercials are Bullish with a score of 66.9 percent and the small traders (not shown in chart) are Bullish with a score of 53.3 percent.
Copper Futures Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
34.7
41.9
10.4
– Percent of Open Interest Shorts:
37.6
42.0
7.4
– Net Position:
-4,675
-163
4,838
– Gross Longs:
57,191
68,905
17,079
– Gross Shorts:
61,866
69,068
12,241
– Long to Short Ratio:
0.9 to 1
1.0 to 1
1.4 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
32.6
66.9
53.3
– Strength Index Reading (3 Year Range):
Bearish
Bullish
Bullish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
-6.2
4.6
10.6
Platinum Futures:
The Platinum Futures large speculator standing this week was a net position of 30,503 contracts in the data reported through Tuesday. This was a weekly lift of 5,837 contracts from the previous week which had a total of 24,666 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bullish with a score of 50.1 percent. The commercials are Bullish with a score of 54.2 percent and the small traders (not shown in chart) are Bearish-Extreme with a score of 3.9 percent.
Platinum Futures Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
59.6
26.9
9.9
– Percent of Open Interest Shorts:
15.9
74.5
6.1
– Net Position:
30,503
-33,157
2,654
– Gross Longs:
41,555
18,734
6,879
– Gross Shorts:
11,052
51,891
4,225
– Long to Short Ratio:
3.8 to 1
0.4 to 1
1.6 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
50.1
54.2
3.9
– Strength Index Reading (3 Year Range):
Bullish
Bullish
Bearish-Extreme
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
10.8
-7.1
-31.8
Palladium Futures:
The Palladium Futures large speculator standing this week was a net position of -2,542 contracts in the data reported through Tuesday. This was a weekly reduction of -336 contracts from the previous week which had a total of -2,206 net contracts.
This week’s current strength score (the trader positioning range over the past three years, measured from 0 to 100) shows the speculators are currently Bearish-Extreme with a score of 9.8 percent. The commercials are Bullish-Extreme with a score of 86.8 percent and the small traders (not shown in chart) are Bearish with a score of 48.9 percent.
Palladium Futures Statistics
SPECULATORS
COMMERCIALS
SMALL TRADERS
– Percent of Open Interest Longs:
25.1
55.6
15.0
– Percent of Open Interest Shorts:
55.1
26.9
13.6
– Net Position:
-2,542
2,422
120
– Gross Longs:
2,120
4,700
1,270
– Gross Shorts:
4,662
2,278
1,150
– Long to Short Ratio:
0.5 to 1
2.1 to 1
1.1 to 1
NET POSITION TREND:
– Strength Index Score (3 Year Range Pct):
9.8
86.8
48.9
– Strength Index Reading (3 Year Range):
Bearish-Extreme
Bullish-Extreme
Bearish
NET POSITION MOVEMENT INDEX:
– 6-Week Change in Strength Index:
-9.3
7.8
11.9
Article By InvestMacro – Receive our weekly COT Newsletter
*COT Report: The COT data, released weekly to the public each Friday, is updated through the most recent Tuesday (data is 3 days old) and shows a quick view of how large speculators or non-commercials (for-profit traders) were positioned in the futures markets.
The CFTC categorizes trader positions according to commercial hedgers (traders who use futures contracts for hedging as part of the business), non-commercials (large traders who speculate to realize trading profits) and nonreportable traders (usually small traders/speculators) as well as their open interest (contracts open in the market at time of reporting). See CFTC criteria here.
The US inflation outlook, and how it’ll impact the Fed’s plans for raising US interest rates, is set to come into sharpened focus over the coming week which also features these major data releases and events:
Monday, January 9
EUR: Eurozone November unemployment; Germany November industrial production
GBP: BOE’s Huw Pill speech
USD: Atlanta Fed President Raphael Bostic speech
Tuesday, January 10
GBPUSD: Speeches by Fed Chair Jerome Powell and BOE Governor Andrew Bailey
World Bank set to release global economic prospects report
Wednesday, January 11
AUD: Australia November inflation and retail sales
Thursday, January 12
AUD: Australia November external trade
CNH: China December CPI and PPI
USD: US December CPI; weekly initial jobless claims
USD: Fed speak – Speeches by St. Louis Fed President James Bullard, Richmond Fed President Thomas Barkin
Friday, January 13
CNH: China December external trade
GBP: UK November GDP, industrial production, trade balance
EUR: Eurozone November industrial production
USD: US January consumer sentiment
S&P 500: US earnings season kicks off
This time last week, we contemplated whether the US dollar would falter at the onset of 2023.
Still, to be fair, this article is being published before this first week of 2023 is over.
We’ve still got the marquee US nonfarm payrolls (NFP) due in just a few hours today (Friday, January 6th).
Even as we wait for the pivotal US jobs report, the astute investor and trader would already be keeping an eye on the coming week.
And looking at the charts, one can’t help but notice that the USD Index appears headed for a “death cross”.
What is a “death cross”?
The death cross occurs when an asset’s 50-day simple moving average (SMA) crosses below its 200-day counterpart.
Investors and traders take such an event as confirmation of the downtrend for that particular asset’s prices.
This technical event is widely viewed as a “bearish” sign, suggesting that prices would decline further after the “death cross”.
For example, the last time this USD Index witnessed a “death cross” was back in July 2020.
After such a bearish technical event, this index then fell by a further 9.7%, before reaching bottom at 1.04399 in February 2021.
What could push the USD Index closer to a death cross?
If the US inflation data due on January 12th comes in lower than expected, that should drag the dollar even lower.
Markets are currently expecting the December consumer price index (CPI) – which measures headline inflation – to register a 6.6% advance compared to December 2021.
If so, that 6.6% would be significantly lower from the 40-year high of 9.1% that was registered back in June 2022, though still three times higher than the Fed’s 2% inflation target.
Recall the reason for these Fed rate hikes = it’s to subdue US inflation.
Also, recall how the buck has been reacting to market expectations surrounding US interest rates:
For the first 3 quarters of 2022, the US dollar drew tremendous strength from the notion that the Fed will send rates even higher, which the central bank did.
The US dollar then faltered since October as markets begin to believe that the Fed is close to being done with its aggressive rate hikes.
Adding to the dollar’s weakness in recent months is the idea that the Fed may even have to cut interest rates later in 2023 in order to offset the risk of dragging the world’s largest economy into a recession.
Potential scenarios for USD Index in response to CPI release:
1) Dollar down: If markets are given further evidence that US inflation is further subsiding, that should give the Fed less of a need to send interest rates much higher.
Such hopes may drag the USD Index back lower to the 1.170 region, and potentially see this USD Index form a death cross.
2) Dollar up: If next week’s US inflation print exceeds the market forecasts of 6.6%, that implies that the Fed has more to do to combat stubborn inflation.
Such a hawkish narrative may well send this USD Index upwards to test its 50-day SMA (around 1.20) as the immediate resistance level, while perhaps delaying the formation of a “death cross” for a while longer.
The latest Federal Reserve meeting minutes suggest that the U.S. economy is headed for recession as the central bank will remain aggressive in raising rates to cool inflation, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning comes from deVere Group’s Nigel Green as the meeting minutes released Wednesday signal that the U.S. central bank remains cautious on inflation, with officials agreeing that “rate cuts shouldn’t happen in 2023.”
He says: “Investors have been waiting with bated breath as the Federal Open Market Committee (FOMC) minutes from the December meeting released on Wednesday give us more insight into what factors the Committee has been using for future policy decisions.
“It appears that officials remain hawkish and are especially concerned about the tight labor market.
“We expect that the latest minutes will give the central bank further support to maintain interest rates higher for longer than had been previously priced-in by the markets.
“With the labor market not cooling as fast, there seems to be a considerable turnaround in tone from the more dovish minutes in November.”
He continues: “These minutes dash yet more hopes for an economic soft landing.
“Investors are increasingly concerned that the Federal Reserve could now overtighten and will steer the U.S. economy into a major recession.
“Of course, the central bank will argue it needs to continue with rate rises to bring inflation back to target.
“But it must also ensure that the tight labor market doesn’t overshadow the broader picture and continue to overdo the hikes, which would make a U.S. recession deeper and longer.
“As the world’s largest economy, this would clearly have a serious, negative impact on the global economy.”
Nigel Green concludes: “The tone of the minutes indicate the Fed is not yet ready to pivot as the central bank believes risks for inflation remain to the upside and they will keep tightening until more substantial progress is made on bringing it back closer to target.
“Inflation remains their primary concern, not risks to economic growth.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
The outlook for the new year is dominated by this one fear: recession.
Major economies such as the UK and Eurozone are believed to be already going through an economic contraction. The US – the world’s largest economy – expected to experience a downturn later this year.
Yet amidst all these recession fears at the onset of 2023, the financial markets still do present opportunities for investors and traders.
Here are 3 assets that may see a stellar year:
1) Gold to hit $2000?
Gold has long been seen as a safe haven asset: a way for investors to protect their money in times of heightened fear and uncertainty.
As proof, here’s a list of how gold performed during the US recessions (as listed by the NBER) that have occurred since 1990:
Gulf War Recession (July 1990 – March 1991) = gold soared by as much as17.5% at its peak on 21 August 1990.
Dot Com Recession (March 2001 – Nov 2001) = gold up by as much as 10.4% at its peak on 26 Septembe 2001.
The Great Recession (Dec 2007 – June 2009) = gold rose by as much as 28% by March 2008 when it traded over $1000 per ounce for the first time ever in the US futures market.
Covid-19 Recession (Feb 2020 – April 2020) = gold hit a record high at $2075.47 in August 2020
Using such past performances as a guide, the prospects of gold’s prospects of climbing by another 9% from today’s prices ($1848 at the time of writing) to reach $2000 doesn’t seem too farfetched.
Fundamental perspective: What needs to happen?
Besides a US recession, the key component for gold’s ability to climb higher rests on this key factor:
The US dollar has to weaken further as markets brace for the Fed eventually cutting interest rates to help support the US economy.
As bullion’s “enemy” becomes less potent in the face of a looming recession, that could encourage gold bulls to push the precious metal even higher in 2023.
At the time of writing, markets are predicting a 71% chance that we could see $2000 gold once more in 2023.
What could go wrong?
If gold’s enemy #1 from 2022 makes a return: US inflation remains stubbornly higher, forcing the Fed to continue hiking interest rates aggressively, which in turn restores demand for the US dollar.
That may force a major rethink among gold bulls, perhaps accompanied by the unwinding of some of bullion’s gains of late.
2) Japanese Yen: USDJPY back down to 125?
Last year, the Yen fell by 12.2% against the US dollar, making JPY the second-worst performing G10 currency against the greenback in 2022.
That’s all about to change, with the Yen ready to catch up.
Fundamental perspective: What needs to happen?
It all depends on what the central banks in the US and Japan do in relation to one another.
Fed pivot: If the Federal Reserve “pivots” and is forced to lower US interest rates later in 2023 in order to offset a US recession, that should spell more weakness for the dollar.
BoJ pivot: If the Bank of Japan also does its own “pivot” but instead of cutting, it actually raises its own interest rates, that should spell more gains for JPY.
Such expectations will come into sharper focus once the new central bank governor takes over when current BoJ Governor Haruhiko Kuroda’s term expires in April.
Keep in mind that the BoJ’s policy balance rate now still rests at negative 0.10%, making it a clear laggard across major central bankers that had been busy hiking their own rates throughout 2022.
In short, if the BoJ hikes rates at a time when the Fed is cutting its own rates (or perhaps even just thinking about making such a move), that should help pave the way for the Yen’s speedy recovery.
For now, markets predict a 53% that USDJPY would eventually trade below 125 sometime over the next 12 months.
What could go wrong?
Still-dovish BoJ: the incoming BoJ Governor keeps Japan’s benchmark rate mired in negative territory on signs that inflation is not as sticky as hoped.
This scenario would be made worse if the Fed stays hawkish and keeps sending US interest rates much higher than the currently forecasted peak of around 5%.
A still-dovish BoJ + a still-hawkish Fed = USDJPY’s downside severely capped.
3) FTSE China A50 Index back above 14,000?
There is much hope surrounding the reopening of the Chinese economy this year, with the government essentially having abandoned its Covid Zero campaign.
And such optimism has already been playing out in Chinese stocks in recent months.
Here’s a comparison between the FTSE China A50 Index against its global peers since end-October through the present day:
FTSE China A50 Index: +15.9%
Europe’s STOXX 50: +7.3%
MSCI ACWI Index (stocks across developed and emerging markets): +3.26%
S&P 500: -1.24%
Fundamental perspective: What needs to happen?
The world’s second largest economy needs to finally break off the Covid shackles that have hampered it over the past 3 years.
Once the economy can overcome the recent snags of skyrocketing Covid cases and hospitalizations, consumers need to eventually feel confident once more about going out their economic activities, be it returning to the office, spending money at physical stores, and even going on vacations.
Assuming that China can find a steady footing and follow in the rest-of-the-world’s footsteps in terms of the post-pandemic recovery, that promises to help restore the earnings of China’s public-listed companies, which in turn should entice more investors into pushing these stock prices higher.
Additionally, policymakers on both the fiscal (government) and monetary (central bank) sides must continue adopting a supportive stance to shore up China’s economic momentum.
All of the above should position China as an attractive investment destination for foreign investors, especially within the context of a looming global recession.
What could go wrong?
If China continues to struggle with the Covid menace, that would only worsen the expected global recession and deal a massive blow to hopes for a sustained recovery in Chinese stock markets.
Also, if China’s inflation starts to run too hota la the rest of the world, that may force policymakers into a restrictive stance to curb inflation at the expense of economic growth.
If 2023 also sees a return of heightened geopolitical tensions between the West and China, that could also sour sentiment surrounding Chinese assets.
Article by ForexTime
