USD, EUR/USD, USD/CAD, Crude Oil, Dow Jones Analysis: COT report

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Market positioning from the COT report - as of Tuesday June 11, 2024:

Large speculators increased short exposure to EUR/USD futures by 19% (22.9k contracts) and trimmed longs by 0.7% (-53 contracts)
Large speculators reached a record level of net-short exposure to CAD futures to strongly suggest a sentiment extreme could be near
Net-long exposure to GBP/USD increased for a third week, to their most bullish level in three months
They also increased net-long exposure to NZD/USD futures to their most bullish level since November 2021
Managed funds reduced gross-short exposure to WTI crude oil -31% (-38k contracts) last week
Net-long exposure to silver and copper was lower among large speculators, gold was flat
Managed funds increased their gross-short exposure to Dow Jones E-mini futures at their fastest weekly pace on record

US dollar positioning (IMM data) – COT report:

The swing low for the USD index that I hinted at last week is coming along nicely. Traders are shorting EUR/USD and aggregate positioning towards USD inflows across all futures contracts increased, according to IMM (International Money Market). However, Asset managers trimmed net-long exposure to the USD index, whereas large speculators exposure remained flat. IN either case, both remain clearly net-long. And with EUR/USD falling due to political turmoil in France, it suggests further upside potential for the USD index – seeing as the euro accounts for around 57% of its basket weighting.

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

News of the snap election in France tempted euro bulls from the sidelines. Large speculators increased gross-short exposure by 19% (22.9kcontracts), although they only trimmed longs by a mere -54 contracts (-0.7%). Still, it has dragged net-long exposure to a 4-week low, and not from a particularly bullish level to begin with. Asset managers remain heavily net long, although they also increased short exposure last week. And looking at price action since data was compiled last Tuesday, short interest has likely increased and could threaten the net-long exposure status of EUR/USD futures.

CAD/USD (Canadian dollar futures) positioning – COT report:

Large speculators increased their net-short exposure to Canadian dollar futures to a record high last week. Open interest for all futures contracts hit its second highest level on record. Yet prices remain above a key level of long-term support. And if prices fail to break lower whilst exposure remains at extremely bearish levels, we have to assume that bears will at some point be forced to cover and trigger a rally for CAD (which could be USD/CAD bearish). However, whilst COT data can help highlight the underlying strength of trends or their potential to reverse, they’re not the best timing tool. But for now, I suspect some bears will become nervous in the weeks ahead unless we see CAD pairs weaken from already weak levels.

Gold, silver, copper futures positioning – COT report:

Bullish sentiment towards key metals futures markets seems to have cooled, with net-long exposure retreating lower for silver and copper and remaining effectively flat for gold. All of these metals have seen extended moves to the upside recently, so even a slight correction would not come as a huge surprise. And with the Fed finally pushing back on three cuts this year, it adds another reason to be cautious at what appears to be part of a corrective move lower for these metals.

Dow Jones Industrial futures (DJ) positioning – COT report:

Long-long exposure to Dow Jones E-mini futures fell at their fastest weekly pace since October last week. Manage funds increased shorts at their fastest weekly pace on record. We have long highlighted that the Dow has been the short vehicle of choice over the S&P 500 and Nasdaq during bad times, and this does nothing to shatter that assumption. Managed funds and large specs are on the cusp of flipping to net-short exposure, so we could well find that they have made that transition by the next report.

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