With Japan’s fiscal year end now passed, we can begin to focus with more confidence on the COT index for the Japanese yen.   However, as always we need to bear in mind that the COT index must be viewed as a sentiment indicator and not a timing indicator and cannot always be correlated with the spot market.   All the index is telling us at present is that the commercials are continuing to build long futures positions in the Japanese Yen and that this will translate into Yen strength at some point in the spot forex market.

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The COT data for this week shows an increase in the cot index which is now starting to climb away from the extreme lows of the last few weeks, suggesting that we are now seeing the long awaited reversal in the Australian dollar, a move which is reflected in the spot market against many other currencies, of which the US dollar is typical. A look at the weekly chart for the Aussie dollar, reveals a double bottom over the last 6 months, with a breakout from this trading range now imminent, and with a wide spread up bar, the AUD/USD pair are poised to break through the resistance level at 0.7090.   However as always we need to bear in mind that the COT index is a direction indicator only, and not a timing indicator, and should only be used to reinforce or support our view of the spot market.

All the latest fundamental news is now available on the economic calendar, and if you are looking for the latest live price for the AUD/USD currency pair, then just follow the appropriate link. Finally, if you are looking for a good ECN broker I have provided some details on what to look for when choosing your broker.

The Australian Dollar Cot data is very interesting this week as there appears to have been a major transfer of future contracts by the commercial holders who are now net short.  This is not unprecedented and happened at the end of last year.  This does not necessarily signal a long term change in sentiment, merely a response to current market conditions and does not alter my bullish long term of the Aussie Dollar, confirmed to some extent by the weekly chart which is now showing a double bottom. However, in the short term we may see prices continue to fall this week following the shooting star of last week.

You can keep up to date with fundamental news on the economic calendar by simply following the relevant links.

As we can see from this weeks COT report for the Australian Dollar (AUD ), the index for the commercial contract positions continues to remain at the extreme of the indicator, a position we have seen for the last few weeks, and one which aligns the situation in the spot market for the Aussie dollar, which has been moving sideways and consolidating since early November 2008. Whilst the COT index cannot give us precise timing signals for our trades, it can give us a direction for the future, and based on the above chart we should see the Australian Dollar begin to strengthen in the market in the short to medium term. In other words we should see the AUD/USD pair breakout and move higher, and indeed we should see this in other AUD denominated pairs.