Weekly COT report: Traders flip to net-short exposure on the euro

Traders flipped to net-short exposure to euro futures for the first time since early January last week.


As of Tuesday the 3rd of May:

  • According to IMM, traders were net-long the US dollar by $18.3 billion, up +5.9 billion from the previous week.
  • Large speculators flipped to net-short exposure on euro and New Zealand dollar futures.
  • Net-short exposure to the British pound futures were at their most bearish level since September 2019.
  • Traders were net-short copper futures for a second week and at their most bearish level since May 2020.
  • Net-long exposure to gold fell for a fourth consecutive week and is now at its least bullish level in 3-months.
20220509cotFXfx 20220509cotCOMMODfx2

GBP futures:

The BOE (Bank of England) hiked rates by 25-bps last week, yet the pound continued to tumble as they revealed their concerns of weaker growth over the next 18-month alongside high inflation. Yet as the meeting was after this report was compiled then it the current chart may underestimate how bearish traders are on the currency. As things stood on Tuesday, traders were their most bearish on GBP futures since September 2019. And whilst one could argue that positioning may be getting stretched the fundamentals suggest there could be further downside for the pound.



Euro futures:

When you consider that the euro has been in a strong downtrend since it peaked in January 2021, traders have spent a surprising amount of that time with net-long exposure. Last week they reverted to net-short exposure for the first time since early January and only by -6378 contracts. One observation that may explain this characteristic is that it appears to be a well hedged currency, with around 200k contracts long and 200k short over the past couple of months. So for us to expect net-short exposure to increase by any meaningful amount, we need to see large speculators reduce their hedging by closing out those gross longs. Perhaps if the US 10-year yield can break convincingly above the 2018 high could be the trigger.



Copper futures:

The extended (and strict) lockdowns across China are weighing heavily on commodities. Traders were net-short copper futures for a second consecutive week and at their most bearish level in two years. However, prices remain elevated. And as there are no immediate sighs of China stepping away from their ‘zero-covid’ policy, it leaves the potential for further selling pressure on key commodities such as copper. Also take note that gross shorts are rising whilst gross longs are falling which is the winning combination for a strong trend to materialise.


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.

Open an Account