Bullish-yen bets surge at record pace, USD outflows continue: COT report

Market positioning from the COT report – 11 February 2025:

• Net-long exposure to the USD fell by -$4.7 billion last week, to $26.5 billion
• This marks the fastest outflows from the USD in 20 weeks
• Traders continued to pile into long bets on Japanese yen futures
• Asset managed pushed net-long exposure to JPY futures to a near 4-year high
• Large speculators were on the cusp of flipping to net-long exposure on GBP/USD futures

US dollar positioning (IMM data) – COT report:

The US dollar index was lower for a second week, and looks set to deepen it correction. Unless of course we’ve seen a major top, and that Trump will soon begin got attack a high dollar.

I have noted over the last couple of weeks that a correction could be due. And with sentiment shifting away from bulls, we could see further downside over the coming weeks.

Asset managers have trimmed their net-long exposure for a fourth week, although this is mostly a function of longs covering over shorts being initiated. But when you see that traders reduced their net-long exposure to the USD by $4.7 billion last week – its fastest such outflow in 20 weeks – longs could continue to cover and weigh on the US dollar in the coming weeks.

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

While bullish bets on the Japanese yen have been picking up in recent weeks, last week they truly surged. Asset managers and large speculators increased their gross long exposure by 63k contracts between them last week, in both case marking their fastest increase of gross longs on record.

Net-long exposure is now at a near 4-year high among asset managers, and a 20-week high for large speculators. And with neither set of traders near a sentiment extreme, it plays nicely into my theme that the yen is in for a very good year and further gains could await.

CHF/USD (Swiss franc futures) positioning – COT report:

The Swiss franc is another safe-haven currency that is gaining traction against the US dollar. Although in this case, there is no hawkish bank like the BOJ (Bank of Japan) behind it. On the contrary, the SNB (Swiss National Bank) only recently told markets they’d consider negative interest rates if need be.

Still, CHF/USD is not ready to hold below 1.10, and as we’ve seen gross longs elevated for an extended period, a short-covering retracement could be due (bearish USD/CHF).

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

For several weeks I have been highlighting the bullish divergences forming across AUD, CAD and NZD futures. And we’re finally seeing some bullish follow-through after some cautious, countertrend gains against the US dollar.

In particular, we’ve seen a notable pickup on AUD/USD bullish bets and reduction of shorts, which has seen large specs and asset managers decrease their net-short exposure by a combined -26.2k contracts. And should the RBA deliver a not-so-dovish 25bp cut tomorrow, we could find further support for the Aussie with more shorts being covered.

Net-short exposure to CAD futures was reduced by -20.8k contracts between both sets of traders, although large specs also trimmed longs alongside shorts.

NZD futures were the odd one out ahead of this week’s RBNZ meeting, where a 50bp cut is expected. Asset managers increased their net-short exposure to a new record high, while large specs net-short exposure remains effectively flat with both longs and shorts being added. But NZD/USD was actually the outperformer against the US dollar on Friday (after the COT data was collected), so perhaps NZD/USD is shifting towards a phase of outperformance relative to AUD/USD. Particularly if they wrongfoot traders with a 25bp cut or more cautious tone.

Gold futures (GC) positioning – COT report:

Gold futures rose for a seventh week and reached yet another record high, although the shooting star week taints that somewhat. Short bets against gold also creeped higher for a fourth week (large specs and asset managers combined), and with longs being trimmed last week we have seen net-long exposure diminish.

This is not a bearish call for gold, but given it has failed to gun for $3k, the shooting star and rise of shorts, perhaps a pullback is near.

Nasdaq 100 futures (NQ) positioning – COT report:

Nasdaq futures closed at a record high last week, which suggests the asset managers who have been increasing their short bets against it have been burned. Only 75 gross-shorts were added last week, which marked an eight consecutive week of higher shorts. Yet the 6k long added saw net-long exposure rise by a similar amount, to mark its most bullish weekly pace in three months. And as asset managers are not at a sentiment extreme, they may find themselves chasing the move higher.

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