Japanese Yen (JPY) Sentiment Could Be at an Extreme: COT Report

View related analysis:

Market positioning from the COT report – 22 April 2025:

Traders were effectively short US dollar (USD) futures by -$14.8 billion according to data from IMM
Large speculators flipped to net-short exposure to the USD index futures for the first time since December
They increased their net-long exposure to Japanese yen (JPY) futures to a new record high
They also reduced their net-short exposure to Canadian dollar (CAD) futures to a 51-week low
Net-short exposure to Swiss franc (CHF) futures fell to an 18-week low
Asset managers increased their net-long exposure to euro dollar (EUR) futures to a 30-week high
Asset managers were on the cusp of flipping to net-long Australian dollar (AUD) futures, with an exposure of just -5k net short
Net-long exposure to gold futures (GC) fell to a 13-month low among large speculators and managed funds
Large speculators and managed funds increased net-long exposure to WTI crude oil futures by a combined 76.4k contracts

Japanese Yen (JPY/USD) Futures Positioning – COT report:

Both large speculators and asset managers have pushed their net-long exposure to Japanese yen futures to a record high for a third straight week. In both cases, gross longs are rising sharply while shorts are being closed, leaving these traders with a combined net-long exposure of 298k contracts.

With positioning stretched to such an extreme, the risk of a sentiment reversal is growing. Notably, a two-week bearish reversal pattern — a dark cloud cover — has formed on JPY futures. That it appeared near the September high, with exposure at record levels, strengthens the case for a turn lower in the Japanese yen, which in turn favours further gains for USD/JPY.

Japanese Yen Technical Analysis (USD/JPY): Daily Chart

The daily chart shows a bullish divergence has formed on the RSI (2) within the oversold level. Last week’s low also held above the 200-day EMA, with a 2-bar bullish reversal pattern (bullish piercing line). It6 also suggest a double bottom around the 140 handle. Bulls could seek dips within last week’s range in anticipation of a move up to 148, near trend resistance and the 20-day EMA.

US dollar positioning (IMM data) – COT report:

Traders were effectively net-short USD futures by -$14.8 billion last week, their most bearish level of exposure since September. However, net-short exposure is also near its lower 1-standard deviation confidence level, and a small bullish hammer last week warns of trend exhaustion for bears.

Still, asset managers remain net-short- and not by an extreme amount. Unless we see them flip to net-long, any bounce on the US seems likely to fail and eventually see the dollar continue lower.

British Pound (GBP/USD) Futures Positioning – COT Report

Asset managers have reduced their net-short exposure to British pound futures (GBP/USD) to their lowest level since October. Woth net-short exposure at -5k contracts, its possible we’ll see them flip to net-long exposure soon. However, if the US dollar does perform a corrective bounce as I suspect, it could cap gains for GBP/USD over the near term and potentially prompt a pullback ahead of an anticipated breakout. And with large speculators net-long by 20.5k contracts, there’s no immediate sentiment extreme to be wary of.

Commodity FX (AUD, CAD, NZD) futures – COT report:

Australian dollar (AUD/USD) futures

Asset managers reduced their net-short exposure to Australian dollar futures to just -5k contracts, their least bearish level since October. However, this is mostly a function of short covering over the past six weeks, with gross-longs moving sideways. This is not overly bullish, but it does at least show a lack of appetite to short AUD/USD back down to 59c.

Canadian dollar (CAD/USD) futures

There’s also less appetite to short Canadian dollar futures, with net-short exposure among large speculators falling to a 51-week low, and asset managers dropping to a 46-week low. However, unlike AUD/USD, gross-longs have been rising gently higher among asset managers for the past few weeks.

New Zealand dollar (NZD/USD) futures

While net-short exposure is also declining on NZD/USD, gross-longs are moving sideways among asset managers, though they ticked higher by 1.1k contracts among large specs. Out of the three, the Canadian dollar seems to hold the most promise for commodify FX bulls.

How to trade with City Index

You can easily trade with City Index by using 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 company 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.