US Dollar Bulls Hold Firm, but Euro Warns of Squeeze Risk | COT Report

US dollar bulls remain firmly positioned in the futures market, with aggregate net-long exposure holding near $40 billion despite a modest reduction last week. Yet record short exposure to euro futures has failed to push EUR/USD below its May low, raising the prospect of a short-covering rally that could take the edge off the dollar's strength. Meanwhile, yen bulls are regaining momentum, adding to potential USD/JPY reversal risks ahead of this week's central bank meetings.

View related analysis:

COT Report Reveals Resilient Dollar Bulls and Euro Squeeze Risks

Large Speculator Positioning from the COT report

Source: CFTC (COT), LSEG

US Dollar: Futures traders remained heavily net-long USD at $39.3 billion, despite a minor reduction of $4.3 billion from the prior week
EUR/USD: Only minor adjustments to euro futures saw large specs remain net-short by around 134k contracts
GBP/USD: Net-shorts fell 26.5k contracts among large speculators, the fastest weekly pace since December
USD/JPY: Net-long exposure among asset managers reached a 1-year high of 79k contracts
USD/CHF: Gross-longs surged to a record high of 26.7k contracts among asset managers, pulling net-shorts to a 17-month low of 25.5k contracts
USD/CAD: Asset managers were on the cusp of flipping to net-long exposure, with net-shorts falling a combined 45k with large speculators
AUD/USD: Large secs and asset managers pushed net and gross-shorts to a fresh record high, hinting at a sentiment extreme
NZD/USD: Net-shorts rose to a 14-week high despite New Zealand dollar futures rising for a second week

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

US Dollar Bulls Remain Firm Despite Dip in Futures Exposure

While net-long exposure fell by $4.3 billion, let’s not lose sight of the fact that futures traders remained net-long the US dollar by nearly $40 billion in aggregate. Large speculators and asset managers also held a combined net-long exposure to the US Dollar Index of around 32k contracts. And looking at gross exposure to DXY, short interest remains relatively low – and was also slightly reduced from the prior week.

These are not particularly bearish signals for the US dollar from futures traders overall, and a major reason why I do not anticipate a deep pullback on the US Dollar Index. We may find that the Fed is not as hawkish as some expect, which could result in a weaker USD – but I am not expecting the mighty dollar to simply roll over at this stage.

Source: CFTC (COT), ICE, LSEG

EUR/USD Holds Above May Low Despite Record Futures Shorts

What might complicate the outlook for the US Dollar Index is the euro’s inability to break its May low. We’ve already seen a strong decline in the euro, yet it continues to hold above that low despite gross-short exposure among large speculators surging to a record high. If prices cannot go down amid such bearish positioning, it leaves the euro vulnerable to a bounce if conditions improve even slightly.

If the euro does see a short-covering rally from around these cycle lows, the US Dollar Index might be looking at a deeper pullback after all. But simply holding its ground around current levels could take the edge off the dollar rally.

Source: CFTC (COT), CME, LSEG

This content was created by an affiliate of FOREX.com and represents the views and opinions of the author/speakers, not the views and opinions of FOREX.com, StoneX Group Inc., or its subsidiaries. The content has not been independently reviewed by FOREX.com.

Yen Bulls Regain Momentum as USD/JPY Faces Reversal Risk

The weekly yen futures chart shows bullish range expansion and a potential three-bar reversal pattern known as a morning star. This translates to the bearish equivalent – an evening star – on USD/JPY. With long bets trending higher while short bets diminish, perhaps USD/JPY can continue lower in the coming weeks.

Source: CFTC (COT), CME, LSEG

AUD Shorts Hit Records, NZD/CAD Eyes Potential Rebound

Momentum defied AUD/USD bears last week, with prices turning higher from support despite gross and net-short exposure to Aussie futures hitting fresh record highs. With hawkish RBA comments on Sunday, a slightly hotter CPI print could cement bets on a fifth hike and potentially shake out more bears.

A similar pattern emerged in NZD/USD futures, which rose for a second week despite gross shorts also reaching a record high. And with the RBNZ potentially delivering a hawkish hold, it could prompt more NZD/USD bears to question their positioning.

Canadian dollar bulls pushed their gross-long exposure to a 16-year high ahead of this week’s BoC meeting. I have a suspicion the BoC may not be as hawkish as the RBNZ, which raises the potential for a swing low on the NZD/CAD weekly chart.

Source: CFTC (COT), CME, LSEG

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

FOREX.com is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment and CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.forex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.forex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 42.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.

Delayed London Stock Exchange (LSE) Data

The London Stock Exchange (LSE) market data displayed or referenced on this website is provided on a delayed basis and is not in real time. The delay period may vary but is typically at least 15 minutes. This data is intended for information purposes only and should not be relied upon for trading, investment, or other financial decisions. We do not guarantee the completeness, reliability, or suitability of the data for any particular purpose. Users should consult real-time data sources and obtain professional advice before making any financial decisions.