FX Futures Positioning: US Dollar, EUR/USD, USD/JPY | COT report

Positioning in FX futures is beginning to shift in a meaningful way. The US dollar is attracting renewed demand, euro longs continue to unwind, and the Japanese yen has flipped decisively bearish. While not yet extreme across all markets, the latest COT report highlights a growing divergence that could drive volatility across USD pairs in the sessions ahead.

View related analysis:

COT Report: US Dollar, EUR/USD and USD/JPY Futures Positioning

Large Speculator Positioning from the COT report

Source: CFTC (COT), LSEG

US Dollar: Net-long exposure rose to a 13-month high of 12.4k contracts among asset managers
EUR/USD: Large speculators were on the cusp of flipping to net-short exposure for the first time in 12 months
GBP/USD: Net-long exposure declined for a second week among large speculators and a third among asset managers
USD/JPY: Asset managers flipped to net-short Japanese yen futures for the first time since January 2015
USD/CHF: Gross shorts on the Swiss franc rose by 1.5k contracts (4.6%) among large speculators and 2.3k contracts (5.7%) among asset managers
USD/CAD: Traders de-risked from the Canadian dollar, with both groups trimming longs and shorts
AUD/USD: Net-long exposure remained near bullish sentiment extremes among both groups of traders

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

FX Futures Positioning | COT Report (IMM Data)

US Dollar Index (DXY) Futures Positioning | COT Report

I recently outlined a bullish breakout bias for the US dollar index. While last week’s COT data leans in that direction, it’s far from a slam dunk. Asset managers increased net-long exposure to a 13-month high of 12.4k contracts, although gross longs rose by just 1k while shorts were trimmed by 569 contracts. Meanwhile, large speculators reduced both longs and shorts by around 1k and 800 contracts respectively.

That said, the data only runs through last Tuesday’s close, and the US dollar index went on to print a small bullish hammer for the week. My bullish bias therefore remains intact, although it could quickly be challenged if the Strait of Hormuz situation de-escalates or US data comes in soft over the coming sessions.

Source: CFTC (COT), ICE, LSEG

EUR/USD Futures Positioning | COT Report

I had expected euro traders to have flipped to net-short exposure by the release of this report. Close, but no cigar. Instead, large speculators remained net-long by just 9.3k contracts — their least bullish level since flipping net-long in March last year.

While gross longs declined for a sixth consecutive week, the pace of liquidation is slowing. Last week’s 12.8k w/w reduction was roughly a quarter of the 53k drop seen the week prior. With short positioning also stalling, it suggests the bulk of long liquidation may already be behind us — especially with EUR/USD futures traders having reduced gross longs by nearly 40% over the past six weeks.

Source: CFTC (COT), CME, LSEG

USD/JPY Futures Positioning | COT Report

Asset managers flipped to net-short Japanese yen futures for the first time in a year last week. However, this occurred during a week of lower overall volumes, with the closure of gross longs outpacing that of shorts. That said, it marks the fifth consecutive week of declining net-long exposure.

This helped set the stage for USD/JPY to break above 160 on Friday, although the yen has already slipped back below that milestone level—without intervention from the MOF. With potential high-impact headlines from the Middle East and key US data such as ISM and NFP ahead, we could be in for a choppy week around

Source: CFTC (COT), CME, LSEG

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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