CFTC Commitment of Traders (COT) Report, published 29 January 2013 - Technical Analysis. Continuing last week's trend, the speculators aggregate position short position in the USD was again reduced. Last week, the reduction was a mere 25K but this week the specs got serious and reduced their USD short by 96K contracts. This takes their net short USD position down to about 79K.

The biggest reduction came in the C$ and the A$ as they were down 43.7 and 17.2K. With these C$ and A$ reductions the spec long in the commodity currencies has been reduced to 170.8K contracts, the lowest since early December.

There was also a big reduction in the long British pound position. While the specs increased their euro long by a few thousand contracts, they reduced their SF long by 4.4K.

The popular short yen position was increased by the specs to a total of 116.8K contracts. The freefall in the yen has been a bonanza for many specs, and may be one of the reasons there is a pick up in forex activity. Trading activity always picks up when there is more money in the account.

[What Is the COT Report?]

US Dollar Index: There was not much activity in the DI during the period. The OI was up 913 contracts because of small spec activity. They increased their long positions and also their short positions. Large traders made very small position reductions.

Euro (EUR/USD): Open interest in the euro, already large, increased by 33.4K contracts or up 11.2%. Speculators are now long 25.4K, with the longs mostly the big specs. Spreading, which is mostly option activity, is quite high at 11.7% of the total market. With the euro market higher after the close of this report, and the OI in futures higher, this probably means the late week rally last week was additional spec buying.

British Pound Sterling (GBP/USD): Large specs continue to be long the pound, but the small spec decisively made the flipped to the short side of the pound. Small specs reduced their longs by 8K contracts and increased their shorts by 7.9K. The market had been unkind to the pound longs, and it surprising there had not been selling in the pound earlier.

Japanese Yen (JPY/USD): Spec are large shorts in the yen, and the market continues to reward the shorts. Small specs are a 3 ratio short and the large specs are a 2.3 to 1 short. The open interest was up over 10% last week and the total open is 285K, close to that open in the euro. Spreading in the combined futures and option report show the delta-adjusted trade in options to be 13% of the total OI.

Swiss Franc (CHF/USD): Specs continue to reduce their long positions in the SF, but they quite a bit more to sell before flipping to the short side of the franc. The total long is down to 7.4K.

Canadian Dollar (CAD/USD): There was a major shift away from the long side of the C$ during the reporting period. Last week the specs were long 87.9K contracts, and this was reduced to 44.1K contracts. Despite the liquidation, there was a nominal in crease in the OI. It now looks like the run up close to the 1.01 handle was long liquidation. Large specs remain a 3 ratio long.

New Zealand Dollar (NZD/USD): There was a minor reduction in the OI but the specs remain bullish on the NZ$. Large s[ecs are a 5.3 ratio long and the small specs are a 3 long. The market continues to reward the longs despite the fact it is so out of balanced long.

Australian Dollar (AUD/USD): The Australian Dollar has been a favorite of the speculators, but during the latest period, they began to liquidate. The total spec long was reduced from a very large 118.9K to 101.6K. Large specs remain a 3 ratio long. Despite long selling the A$ has not broken much. Does this mean once we are past the Reserve Bank's announcement tomorrow, the market can rally?

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