Your toolbox Commitment of Traders report

In the never-ending quest to figure out what the market may do next, one of the few official reports that are available to give you an idea of market sentiment is going to be the Commitment of Traders report coming out of the CFTC in the United States. You can go to the CFTC website to see these reports, but there are some brokers out there such as Oanda that post these charts on their trading sites.

Using Oanda as an example, you can see the futures contract and the commitment of non-commercial traders. They offer an insight as to what speculators are doing, which of course has an influence on the overall price of a currency pair. This chart will show how people are trading a particular futures contract, which is listed as a currency against the US dollar. For example, when you look at the Euro Commitment of Traders report, you are looking at the futures market for the EUR traded against the US dollar. These futures contracts are treated around the clock and are highly liquid. While they are not part of the spot Forex market, they give us an idea as to how traders feel about a particular currency.

You can see that there is a blue histogram on the chart, showing the attitude of the markets. If we break higher, that shows that there are more net long positions out there, showing bullish pricing. Alternately, if there is a histogram below the zero level, then there are more net short positions, showing bearish attitudes.

There is also a section of the report called “open interest.” This tells you the number of contracts out there that people are trading, which is essentially the same thing as saying volume. The more volume, the more convinced traders are that they should be going in one direction or the other. While not a crystal ball, the Commitment of Traders report can give you an idea as to where people are trying to get to.

Your toolbox Commitment of Traders report