COT data of August 28th, 2012 - British Pound [BP]

British Pounds - Moved higher over the 2-week period since our last report, managing a rally to just above 1.5900 on Aug 23rd - however, there was no follow-through, and last Tuesday's close was off the best at 1.5820. Total o/i (at 117034) was a little higher, although down from the previous week, and spreads (at 633, 0.5% of the total) remained low.

Nett differences were more interesting than usual, with Commercials moving from positive to negative (-5155 basis the 21st, -6109 basis the 28th), and Large Specs moving in the reverse direction (+7833 basis the 21st,  but back to +1968 basis the 28th). Small Specs were possibly the most significant, showing -2678 basis the 21st, but moving to nett long at +4141 basis the 28th. 

Proportionally, Commercials reduced their share of the total long position even further, to 39.6% (from 40.0%), while their shorts were not much changed, at 44.9% (from 44.4%). Their share of the total o/i continued to decline, to 42.7% - a rather low figure.

Large Specs again increased their share of total longs, with 36.4% (from 22.7% just a month ago). Their shorts were also higher, at 34.7%, with total commitments rising to 35.6%. Their balance of plus 1.7 does not provide much guidance either way. Small Specs added to longs once again, now holding 24.0%, with shorts down to 20.4%. Their share of the total is now rather high, at 22.7%.

Overall, Commercials have moved to a nett balance of minus 5.3; at the January lows, the figure was plus 31.1, while soon after the May high and before the subsequent decline it was minus 24.2, so there is as yet no signal that the current steadiness is about to end - nevertheless, the move from nett short to nett long by the Small Specs (currently plus 3.6, compared to 2012 extremes of minus 11.4 at the January lows and plus 12.0 at the May highs), suggests that weak holders could be forced to liquidate if values start to fall.

With no strong signals being given, we have to remain patient, but on balance will wait to become more convincedly bearish.