FX Futures Positioning: USD, EUR, GBP, JPY, AUD | COT report

The latest Commitment of Traders (COT) report reveals an important shift in US dollar positioning across the futures market. After reaching a five-year extreme in net-short exposure, traders have begun trimming bearish bets against the USD, helping fuel the dollar’s recent rebound.

While geopolitical tensions in the Middle East have supported the US dollar, the COT data suggests the move was already brewing, with positioning stretched across several major currency futures markets. The reduction in USD shorts has coincided with notable shifts in positioning across EUR/USD, GBP/USD, USD/JPY, AUD/USD and NZD/USD futures.

With speculative positioning still elevated in several currencies, traders may need to consider whether the US dollar rally has further to run or if crowded trades elsewhere could trigger the next round of volatility.

View related analysis:

COT Report Highlights Shifting US Dollar Positioning in FX Futures Markets

Large Speculator Positioning from the COT report

Source: CFTC (COT), LSEG

US Dollar: Asset managers flipped to net-long exposure to the US Dollar Index, while overall USD exposure in the futures market was reduced by $6.5 billion to -$13.1 billion.
EUR/USD: Short bets against the euro continued to rise, dragging net-long exposure in EUR/USD futures lower for a third consecutive week among large speculators.
GBP/USD: Asset managers reached a record-high level of net-short exposure in British pound futures.
USD/JPY: Large speculators flipped to net-short exposure in Japanese yen futures.
USD/CAD: Net-long exposure edged lower by a combined 8k contracts among large speculators and asset managers.
AUD/USD: Both sets of traders continued piling into longs, pushing net-long exposure higher by a combined 33k contracts.
NZD/USD: Net-long exposure was reduced by 8.3k contracts.

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

FX Futures Positioning | COT Report (IMM Data)

US Dollar Index (DXY) Futures Positioning | COT Report

While much of the US dollar’s rebound can be attributed to the Middle East conflict, there were already signs of an incoming sentiment extreme — and I flagged them several times. Traders were collectively net-short the US dollar on the futures market by $22.7 billion two weeks ago, a five-year high. Since then, they have reduced that exposure by $9.7 billion to -$13.1 billion.

Asset managers also flipped to net-long exposure to the US Dollar Index last week, albeit by a mere 989 contracts. That is arguably closer to the mark than large speculators, who increased their net-short exposure to -4.9k contracts.

100 remains the clear line in the sand for the US dollar this week, with the index trading less than 40 points below it at the time of writing.

Source: CFTC (COT), LSEG

EUR/USD Futures Positioning | COT Report

The top may be in for the euro, and once again it did not arrive without warning. Gross longs had been printing record highs until just a few weeks ago, yet large speculators have begun trimming their positions while asset managers reduced theirs by 14.2k contracts (around 30k over the past two weeks).

That said, rising short bets have made the bigger dent in net-long exposure. Both sets of traders increased gross shorts by a combined 31k contracts, with 20.1k from large speculators, marking a 14.5% increase. Shorts could continue to rise if the Middle East conflict prolongs, particularly if it begins to draw NATO further into the spotlight.

Source: CFTC (COT), LSEG

GBP/USD Futures Positioning | COT Report

Asset managers remain firmly behind short bets against the British pound, with both gross-short and net-short exposure reaching record highs on GBP/USD futures last week. What makes this particularly interesting is that GBP/USD itself does not appear oversold. This raises the question of whether spot prices need to fall further to justify asset managers’ bearish positioning, or if traders could eventually be forced to cover shorts and trigger a counter-trend rally.

Much of this ultimately lies in the hands of the US dollar. For now, however, asset managers appear in no rush to close their shorts, suggesting GBP/USD could still have further downside ahead.

Source: CFTC (COT), LSEG

USD/JPY Futures Positioning | COT Report

Not even the influx of war headlines from the Middle East has been enough to trigger safe-haven flows into the Japanese yen. It seems traders have largely thrown in the towel on any meaningful hiking path from the Bank of Japan, and instead favour the US dollar during periods of turbulence stemming from the war in Iran.

Large speculators flipped to net-short yen exposure by last Tuesday’s close — notably after the war had already broken out. Asset managers trimmed their net-short exposure to a 13-month low of 17.9k contracts, reducing shorts while also increasing longs. There is nothing particularly dramatic in the positioning itself, other than the clear signal that the yen is simply not acting as a safety play around Middle East headlines.

Source: CFTC (COT), LSEG

AUD/USD Futures Positioning | COT Report

Futures traders continued piling into Australian dollar longs, pushing net-long exposure to a nine-year high among large speculators and asset managers. Long positions rose by a combined 31k contracts, up 12.2% for large speculators and 12% for asset managers, while both groups also trimmed short exposure.

What stands out is that this surge in bullish positioning arrived after the US strike on Iran, suggesting traders were more focused on the implications of higher commodity prices and a potentially hawkish RBA than the usual risk-off headwinds for the Aussie. The build in longs also reflects a broader speculative shift that has pushed AUD positioning to multi-year extremes in recent COT data.

Source: CFTC (COT), LSEG

View the full economic calendar

-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.