EUR/USD flipped to net-short exposure, VIX bulls retain control: COT report

Market positioning from the COT report – Tuesday, 22 October 2024:

• Asset managers and large speculators were net-long VIX futures for a second week
• Large speculators flipped to net-short exposure to EUR/USD futures
• Traders increased net-long exposure to the USD by 10.6 billion last week (most bullish week since February 2019)
• Net-short exposure to Swiss franc futures increased among large speculators and asset managers
• CAD traders increased net-short exposure to a 9-weekhigh ahead of the BOC’s 50bp dovish cut
• Large specs increased gross-long exposure to silver futures by 17.3% (12.1k contracts)
• Net-long exposure for gold and silver futures increased for a second week among large specs and managed funds, ahead of record highs printed later in the week
• Yet net-long exposure to copper futures declined for a second week while prices retraced lower for a fourth

US dollar positioning (IMM data) – COT report:

Large speculators smelled the coffee on the USD bullish bet, and flipped to net-long exposure last week. Asset managers were net-long for a third week, and by their most bullish amount in 14 weeks. But perhaps the most impressive stat is that traders increased bullish bets on the USD by $10.6 billion, which was their most bullish weekly change since February 2019. Perhaps this rally will have some legs after all, especially since we’re now seeing large speculators and asset managers increase longs and decrease shorts, as opposed to simply closing shorts like we saw in prior weeks.

EUR/USD (Euro dollar futures) positioning – COT report:

Large speculators flipped to net-short exposure for the first time since July, and by their most bearish level since September 2022. Gross shorts increased for a fifth week while gross longs were trimmed for a fourth. Asset managers remain heavily net long by 192.1k contracts, although it is down from 325k gross-longs from the second week of September.

VIX futures positioning – COT report:

Equity traders continued to hedge against US election event risk via the VIX last week, with both large speculators and asset managers increasing net-long exposure for a second week. Asset managers added 4.9k gross longs and trimmed -1.6k shorts. While VIX prices are not exactly accelerating higher, they do remain elevated around the 19 level, which is high compared with the lower double-digit prints seen in the first half of the year.

JPY/USD (Japanese yen futures) positioning – COT report:

It finally happened. Asset managers threw in their bullish yen towel and reverted to net-short exposure yen futures last week. Large speculators were also their least bullish in 11 weeks, and are now net-long by just 12.7k contracts. Both sets of traders reduced longs and increased shorts, so unless the BOJ surprise with some action this week then yen may continue to weaken in the foreseeable futures. Unless the US election has some tricks up its sleeve and prompts an exodus to the safety of the yen and Swiss franc.

Metals (gold, silver, copper) futures - COT report:

Another week, another record high for gold. And if gold rises, so does silver. Both sets of traders increased their net-long exposure to gold futures for a second week, although they also increased gross shorts slightly to suggest a certain level of nervousness at frothy heights.

They showed a more traditional approach with silver futures by increasing net-long exposure by adding to longs and reducing shorts. Net-long exposure to silver futures rose to its most bullish level since March 2020 among large speculators, and March 2022 among managed funds.

Copper was the odd one of the three metals, as net-long exposure retraced lower for a second week and process were lower for a fourth. So much for China’s stimulus adding to bullish bets.

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