Traders flipped to net-short yen, derisked from AUD/USD, gold: COT report

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.

Market positioning from the COT report – Tuesday, 29 October 2024:

• Large speculators were net-short EUR/USD futures for a second week, increasing gross shorts by 15.4% (27.9k contracts)
• They also flipped to net-short JPY futures, increasing gross short exposure by 34.8% (23.2k contracts)
• Asset managers and large speculators appear to be derisking from AUD/USD futures by trimming longs and shorts
• Early signs of a gold top could be forming with both sets of traders reducing gross-short exposure by a combined 14.8k contracts and reducing longs by -12.4k contracts
• Asset managers pushed net-long exposure to VIX futures to a 1-year high while large specs reverted to net-short exposure

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

Large speculators reverted to net-short yen exposure, marking an end to their 10-week reign in net-long exposure. That was the first spell of bullish exposure since Q1 2021. Asset managers were also net short, but for a second week.

But with the BOJ since delivering a less-dovish-than-expected meeting and murmurs of a potential hike, perhaps their return visit to net-short exposure might be short lived.

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

Large speculators increased their net-short exposure for a second week, and to their most bearish level since September 2022. Yet asset managers remain firmly net-long, and their exposure net was hardly changed last week (down just -1k contracts). Given the multi-week selloff on EUR/USD, I am now wondering if it is due a bounce, which implies a deeper retracement on the USD. I also have a similar view on AUD/USD after its own 5-week selloff.

AUD/USD (Australian dollar futures) positioning – COT report:

Asset managers were their most bearish on AUD/USD futures in six weeks while net-long exposure among large speculators was effectively unchanged. Regardless, there seems to be a general de-risking taking place on AUD/USD futures, with total open interest lower alongside volumes for asset managers and large speculators. Both set of traders trimmed longs by a combined -23.7k contracts and closed shorts by -12.2k contracts.

Gold futures (GC) positioning – COT report:

I’m seeing further signs that all may not be well for gold at these giddy heights. Both large speculators and managed funds reduced long and short exposure to gold last week, which also went on to close with a weekly bearish pinbar.

Gross shorts rose to a 49-week high of 878k contracts among large speculators, and a 23-week high of 39.7k contracts among asset managers. Longs were reduced by a combined -12.4k contracts. The result was net-long exposure being dragged lower by a total of -15.3k contracts between the traders. This is not a large amount in the grand scheme of things, but it does show a certain level of nervousness from bulls around the $2700 area and suggests we may see a correction before prices eventually go on to tag $3000 next year.

Wall Street indices (S&P 500, Dow Jones, Nasdaq 100) positioning – COT report:

We’re also seeing de-rising on Wall Street with net-long exposure to S&P 500 futures falling at its fastest weekly pace in 12 among asset managers (-20.5k contracts). They also trimmed net-long exposure to Dow Jones futures at their fastest pace in four weeks (-2.9k contracts).

Still, they increased net-long exposure to Nasdaq futures by a mere 120 contracts, although price action in the second half of the week suggests traders were generally derisking ahead of the weekend before the US election.

VIX futures positioning (IMM data) – COT report:

Asset managers pushed their net-long exposure to a 52-week high, increasing longs by 9.9% (6.2k contracts) and reducing shorts by -8.4% (-4.1k contracts). And this further suggests they are hedging event risk into the US election, although we’re yet to see VIX futures rise sharply. Although they remain elevated around 20 and have increased the past two weeks.

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