USD Net Shorts Hit Record as AUD Bears Rise, CAD and EUR Gain – COT Report

CFTC’s latest Commitments of Traders (COT) report reveals asset managers pushed their net-long exposure to the US dollar to a record high. Large speculators also ramped up bearish positioning on the Australian dollar, while net-short exposure to the Canadian dollar and New Zealand dollar fell. Meanwhile, the British pound remains a favourite among speculators, and silver shorts were trimmed aggressively.

USD Bears in Control as AUD Sentiment Sours, EUR and CAD Gain Bullish Traction

US Dollar (USD): Asset managers reached a record high level of net-short exposure to US dollar index futures
European dollar (EUR): Net-long exposure increased 10.2k contracts among large speculators
British pound (GBP): Net-long exposure rose by 16.4k contracts, gross shorts -9k (-13.2%), longs rose 7.4k contracts (7%)
Japanese yen (JPY): Net-long exposure fell -6.5k contracts
Australian dollar (AUD): Net-short exposure rose 6.8k contracts, with gross-shorts rising 7.2k contracts (7.8%), longs were flat on the week
Canadian dollar (CAD): Net-long exposure rose 15.3k contracts, with gross-longs rising 2.4k (6.4) and shorts falling by -14.3k contracts (-11.3%)
Swiss franc (CHF): Gross-long exposure increased 29% last week, shorts reduced by -8%
Gold (GC): Net-long exposure was little changed between large speculators or managed funds
Silver (SI): Large speculators reduced gross-short exposure by -17.9k contracts (-11.4%)
Crude Oil (WTI): Gross-longs rose 24k contracts, mostly due to short covering with gross-longs falling -2.7k contracts (-12.6%)

US Dollar Positioning (IMM Data): Weekly COT Report Analysis

Asset managers pushed their net-short exposure to the US dollar index to a record high of -8.2k contracts. The US dollar index also printed its lowest weekly close since March 2022. If we look at positioning against USD futures in aggregate, traders were net-short by -$16.6 billion last week, which is an increase of 3.9 billion.

I have made the case in recent weeks that the US dollar selloff could be in for a bounce. But unless traders get behind it, any such bounce could be limited, unless a suitably bullish catalyst unfolds.

EUR/USD Positioning: Euro Futures – Weekly COT Report

While large speculators increased their net-long exposure to EUR/USD futures by 10.2k contracts last week, asset managers trimmed their by -273. And while asset managers bullish exposure remain elevated compared to large speculators, they’re not at a sentiment extreme and there is little appetite for shorts. Furthermore, net-long exposure to EUR/USD futures is trending higher among large specs. None of which points to an imminent reversal lower for the euro, or higher for the US dollar index.

CHF/USD Positioning: Swiss Franc Futures – Weekly COT Report

Trader’s net-exposure to the Swiss franc saw quite the divergence last week, with large speculators decreasing net-short exposure by -4.8k contracts and asset managers increasing theirs by 5.6k contracts. While this effectively cancels one another out, the bigger picture should be considered.

Large specs have been reducing short exposure due to safe-haven demand while asset managers have been increasing their dur to the prospects of negative interest rates. The Swiss National Bank (SNB) are expected to cut their interest rate by 25bp to 0% this week. Its unclear whether they’ll signal further cuts, but the overnight index swap market (OIS) remain in negative territory to suggest they will. So that could see large specs eventually increase their net-short exposure to the Swiss franc in due course, if or when its safe-haven demand falters.

Commodity FX Positioning (AUD, CAD, NZD): Weekly COT Report Overview

Positioning among the major commodity FX currencies has diverged in recent weeks, with net-short exposure to the Canadian dollar and New Zealand dollar falling, yet rising against the Australian dollar.

The Reserve Bank of New Zealand (RBNZ) is at or near the terminal rate of its easing cycle, which has made NZD the outperformer over AUD during a weaker US dollar environment. The Bank of Canada (BOC) also held rates for a second consecutive meeting earlier in June, with hotter inflation suggesting the central bank could be closer to its terminal rate.

Yet bets against the Australian dollar are on the rise, with net-short exposure increasing last week due to a rise in gross shorts and a reduction in gross longs. The fact that AUD/USD continues to falter each time it tries to break above 65c is also a clue that the Aussie could be near an inflection point. And with recent data showing slower inflation and growth, a slightly softer set of employment figures this week could weigh further on AUD/USD on bets of an interest rate cut by the Reserve Bank of Australia (RBA) in July.

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.