menta, and for the benefit of any others who want to know how the USDindex works - the USDi trend is shakey at best right now.
(if there is anyone else with more authority on this than me in the audience, jump right in)
Firstly, the USDindex (aka thhe US dollar, US dollar basket) is an ICE exchange futures contract that allows people to invest in the US dollar in an otherwise non denominational contract (not EU, not UC, or Yen specific etc).
It is defined as representing a basket of 6 currencies. A calculation can be derived using recent historical price data. The six countries did not include the AU pair, but I suspect now it might - given that the AU pair is no.5 trading by volume, it might actually have a small impact on the USD.
The 6 are - EUR, CHF, JPY, GBP, SEK and CAD
Without knowing the source, the COT report to which you refer only accounts for traders in the USDindex only, and NONE of buyers and sellers of paper currency. So this is your first caution - consider it a side bet indicator, and use it for trend confirmation.
Open interest is an equally important indication of trend or change. The commercial category is ALWAYS on the wrong side of the larger trend. Currently 'commercial' interest is less than 16% if this trade - it should be 'much higher' (around 50%) to be meaningful - so commercial traders aren't interested in the USDindex contract yet. Also, they are only slighly long, with much larger speculative positions remaining net short. Importantly - large specs and small specs cannot agree which is the only meaningfull telltale. Small specs are sometimes leading indicators - sometimes.
Decreasing open interest is an indication of an impending trend change (you need to close positions in order to switch them), increasing open interest in the direction of the trend IS THE TREND as you will see net positions expand to the +ve and -ve when this happens also. Currently, the USdindex contract is played 85% by speculators, who can and will switch net positions in a matter of weeks from present levels. No doubt the USdinex chart has them looking on with interest - but it remains that the EU and UC (together with the other 4 and the AUD most likely) will determine the USD.
Latest CFTC ICE COT here (long format)- http://www.cftc.gov/dea/options/deanybtlof.htm
More importantly, what generates 80% of the USD index is EUR, CHF, GBP and JPY (in that order). So COT charts for those pairs are actually more relevant - and you can actually get by with EU and UC only. Massive long open interest in the EU, and very small long open interest in the CHF. Says the USD has more chance of down than up in the near term - which is also what shows on the charts.
When you look at the bullish/bearish sentiment of the EU and UC you can piece together a clearer picture, rather than relying on the conjecture printed from someone who doesn't know any better.
Expect opening interest to close down on the EU and open up on the UC. What you don't know is at what level (price) the majority of these positions were opened up at. 50% would not have been recently.
The best site (when it is up to date) is this one http://www.forexrazor.com/Analysis/Commitment-of-Traders.aspx
