Market Sentiment

We may have seen an important swing low on the yen looking at the change of speculative market positioning. And that could see a much deeper pullback on USD/JPY.

While traders pushed net-long exposure to the USD to a 20-week high, there is also been a notable pickup of long yen bets. They're also piling into EUR/USD shorts, which is why I continue to suspect USD/JPY and EUR/USD may converge and move lower.

As the latest COT data is up to the close of election day, it shows how traders were positioned ahead of the results. Subsequent market moves suggest they needn't have piled into VIX longs and could have increased net-long exposure to the USD. But they were right to be wary of gold.

Large speculators joined asset managers with a net-short exposure to yen futures ahead of the BOJ meeting, although their bearish positioning may be ‘short lived’ if the central bank really is a step closer to raising rates. De-risking also appears to be in the air ahead of the US election looking at positioning across AUD/USD, gold and the VIX.

Another week, another record high for gold. And another start to the week where I am asking myself “when is this rally going to top?”. While new highs are eventually favoured, a small pullback may not hurt first.

It was another flipping week for futures traders, with the $10.6 billion added to USD longs seeing the dollar flip to net-long exposure, large speculators revert to net-short EUR/USD and asset managers flip to net-short JPY/USD exposure.

Bullish bets for the VIX continued to rise, which saw asset managers flip to net-long exposure and large speculators close to doing so themselves. Bullish interest for the USD index also rose alongside prices, yet traders shied away from cured oil and were more bearish on commodity FX. Positioning was also mixed across Wall Street indices.

Traders seems to be hedging event risk with the VIX heading into the US election, with traders close to net-long exposure despite record highs for the VIX. Asset managers and large specs continue to have opposing bets on the USD index, with the former generally being on the correct side of the dollar’s direction.

Large speculators flipped to net-long exposure to yen futures for the first time since February 2021, fuelled by a surge in long bets and plunge of shorts. Yet asset managers are taking a more cautious approach to being bullish the yen.

Large speculators were on the cusp of flipping to net-short yen futures, and asset managers crossed the net-long threshold last week. Yet subsequent price action across multiple markets suggests the worst of last week's volatile moves could be behind us.

We’ve seen a vast reduction of net-short exposure to yen futures over the past four weeks. And with the yen rising over 4% since Tuesday's close, it’s likely large specs are already net long.

The yen has flourished in a risk-off environment with the added benefit of a dovish Fed and renewed bets of a BOJ hike. Commodity FX and metals were also dragged lower in the carnage.

The commitment of traders (COT) report shows how large speculators are positioned across futures markets on the CME exchange.

Gold futures traders waded into the metal ahead of the record high set last week. But if we adjust large speculative positioning for open interest, it turns out they reached a record level of bullish exposure five weeks ago.

Large speculators surged into GBP/USD long bets last week, pushing net-long exposure to a record high and at the fastest weekly pace since records began. They also continued to trim net-short exposure to yen futures for a second week, after it nearly reached a record high of its own.

Large speculators flipped to net-long exposure to EUR/USD futures after a 2-week hiatus, whilst AUD/USD breached the bullish threshold for the first time in three years according to the commitment of traders report (COT).

Large speculators were on the cusp of reaching a record level of net-short exposure to yen futures last week, whilst they're also getting close to reaching net-long exposure to AUD/USD futures.