Top Story

Weekly COT Report: Yen Traders Flip To Net-Short


As of Tuesday 15th October:

  • Traders increased net-long exposure on USD by $2.1 billion to $20.4 billion, their most bullish stance in 17 weeks (up $2.1 billion to $23.3 billion against G10)
  • Large speculators flipped to net short on the Japanese yen
  • The largest weekly change among FX majors was the yen, which saw traders close -6.4k long and add +11.3k short contracts
  • The commodity FX divergence continues, with traders adding to CAD long exposure and increasing net-short exposure to AUD and NZD



DXY: Large speculators reduced net-log exposure on the US dollar index for two consecutive weeks up to last Tuesday. And that was ahead of its -1.2% decline and worst week in 17. Furthermore, its endured its worst 12-week rolling period since August 2018. Still, it remains in a wider, bullish channel so support may be found around 97 next week. Interestingly bears also reduced exposure for the past two weeks so the decline has been seen on lower open interest (volume).  



JPY: Traders flipped to net-short for the first time in 11 weeks, further underscoring the risk-on vibe market have enjoyed of late. It appears the cycle peak for net positioning was in late August and, if previous cycles are anything to go by, perhaps traders could push this further into net-short territory over the coming 2-3 months (Santa’s rally anyone?).



CAD: Net-long exposure was cautiously higher, although we have Canadian elections on Monday to factor in. Read Matt Weller’s take on the razor-thin Canadian election. Fundamentally, Canada is in a strong position with record low employment and being just one of two leading economies to not have growth outlook lowered by IMF. Once the election noise is out of the way a case can be made for a stronger Loonie. Market positioning is far from stretched and its possible we’ve seen a cycle low on the Net-long index. Therefore, I’m sticking to my personal view that we’ve seen a major top on USD/CAD.



As of Tuesday 15th October:

  • Net-long exposure to gold and silver hit a 12-week and 8-week low, respectively
  • Exposure to WTI was little changed, although both long and short contracts were added
  • Traders reduced net-long exposure to Palladium slightly whilst prices closed to a new record high
  • Large speculators have the highest short exposure to the VIX in 5-months



Gold: et-long exposure to gold was trimmed by -22.5k contracts. Over the past 12-weeks, the average change is a mere +128 contracts, which may explain why prices are struggling to push higher. Gross longs have increased by +7.5k contracts and for a 2nd consecutive week, so my view remains consistent with last week; expect choppy trading for the foreseeable future.  



VIX: Traders are shorting the VIX at the highest level since May which. Incidentally short exposure was at a record high in May, just ahead of the VIX spiking higher. Still, this serves as a warning only as VIX typically slows lower for longer periods before spiking higher, then mean reverting quickly. But then again, with equities trading just below their record highs, then perhaps we should be on guard for a correction and VIX as a result.


Related Analysis:
USD/CAD Testing Key Support at 1.3140 Ahead of Razor-Thin Canadian Election
FTSE Traders Eye Saturday's Vote
Volatility Assessment Ahead Of Brexit Deal Vote | GBP/USD, GBP/JPY, EUR/GBP
Week Ahead: Brexit Vote, Canadian Elections and ECB
Mind the Gap after Brexit Vote

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

The markets are moving. Stop missing out.

Open an Account