Yen Bears Capitulate, US Dollar Nearing Sentiment Extreme? | COT report

The latest CFTC Commitment of Traders (COT) report reveals a notable shift in FX futures positioning. Japanese yen bears are finally capitulating, aggregate US dollar bullish exposure has climbed to a 10-year high, and bearish positioning against the euro, Canadian dollar and New Zealand dollar continues to build. Here's what the latest positioning data may signal for the major currency pairs.

View related analysis:

Japanese Yen Bears Capitulate as US Dollar Positioning Nears a Sentiment Extreme

Large Speculator Positioning from the COT report

Source: CFTC (COT), LSEG

US Dollar: Net-long exposure edged higher by $1 billion to a 10-year high of $39.8 billion, hinting that USD positioning may be approaching a sentiment extreme.
EUR/USD: Large speculators flipped to net-short exposure, gross-shorts reached a record high among asset managers
GBP/USD: Large speculators and asset managers reduced their net-short exposure to the British pound by a combined 27.3k contracts, driven by a notable increase in longs and trimming of shorts.
USD/JPY: Net-short exposure was finally reduced after short bets on the Japanese yen were cut by a combined 51.3k contracts.
USD/CHF: Large speculators trimmed net-short exposure for a second consecutive week to 37.4k contracts, with gross longs rising to a 13-week high of 10.6k contracts.
USD/CAD: Net-short exposure to Canadian dollar futures rose to an 18-month high among large speculators and a 14-month high among asset managers.
AUD/USD: Large speculators increased their net-short exposure by 7k contracts to a 30-week high.
NZD/USD: Net-short exposure to New Zealand dollar futures reached a record high of 65.2k contracts among large speculators.

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

For traders wanting a deeper understanding of futures positioning, I’ve also published a guide on how to read and interpret weekly COT data in forex markets.

FX Futures Positioning | COT Report (IMM Data)

US Dollar Index (DXY) Outlook | COT Futures Positioning

Bulls have enjoyed a 6.5% rebound from the January low, although more than 4% of those gains have come since June. With the rally now pausing for breath and signs of a potential sentiment extreme emerging, it is worth considering the scope for a pullback in the weeks ahead. I appreciate this will not be a popular view with a hawkish Fed, but turning points are rarely popular when they first emerge.

I still see scope for another leg higher, with the US Dollar Index potentially reaching 101.50–102.00, particularly with a doji forming last week and prices holding above 100.50.

That said, we should keep in mind that net-long exposure to the US Dollar Index is nearing its 2025 high among asset managers, while bullish exposure among large speculators has plateaued at around 13k contracts. Moreover, aggregate net-long exposure to the US dollar across currency futures has climbed to a 10-year high of $39.8 billion.

Source: CFTC (COT), ICE, LSEG

EUR/USD Outlook | COT Futures Positioning

Euro futures traders flipped to net-short exposure for the first time since April, reaching their most bearish level since February 2025 at -16.3k contracts. Traders increased gross short exposure by 13.4k contracts, with short positions among asset managers climbing to a fresh record high. Large speculators also reduced long positions by 12.3k contracts.

While the surge in short positions may point to a sentiment extreme among euro bears, overall net-short exposure remains relatively modest by historical standards. EUR/USD traders should therefore remain alert to the risk of a break below the June low if the US Dollar Index makes one final push towards 102.

Source: CFTC (COT), CME, LSEG

USD/JPY Outlook | COT Futures Positioning

For several weeks, I have been outlining the potential for a sentiment extreme in the Japanese yen futures market. Recent COT data suggests a bearish capitulation is finally underway, with gross short positions falling by a combined 48.7k contracts last week alone. That represents a reduction of more than 10% among large speculators and asset managers—and that was before the yen strengthened on Friday following reports that Japanese officials had advised the country's pension fund to increase purchases of domestic assets.

We have yet to see a meaningful move lower in USD/JPY, but the case for one may be building. Note my observations on USD positioning and how it could be approaching a sentiment extreme of its own in the coming weeks. If the US dollar rally falters, it could pave the way for a more meaningful move lower in USD/JPY.

Source: CFTC (COT), CME, LSEG

Commodity FX Futures Positioning (AUD, CAD, NZD) | COT Report

Futures traders remains bearish against the major FX commodity pairs, though more so against the Canadian dollar and Kiwi than the Australian dollar. The Loonie and New Zealand dollar may be at risk of a sentiment extreme in the coming weeks while Aussie dollar bearish positioning is showing signs of slowing, without being anywhere near an extreme.

AUD/USD Futures Positioning | COT Report

A gradual reduction in net-long exposure has seen net-short positioning among large speculators rise for a fourth consecutive week to 24.7k contracts. However, the increase in gross short positions has effectively plateaued, which makes me suspect the downside for AUD/USD may not be overly aggressive in the coming weeks. None of the positioning metrics point to an imminent sentiment extreme, just a growing appetite to short a market that has rallied strongly. The daily chart also suggests bullish momentum is waning, so the Aussie may be due for another leg lower towards its 200-day EMA.

NZD/USD Futures Positioning | COT Report

Futures positioning for the New Zealand dollar may be signalling a sentiment extreme among bears, with net-short exposure reaching another record high of -65.2k contracts among large speculators. Net-short exposure among asset managers has also climbed to its highest level since November, which was itself a record high.

The recent strength in NZD/USD plays into this theme and could still leave plenty of bears vulnerable to capitulation. If NZD/USD continues to rise while AUD/USD generates mildly bearish signals, it could spell trouble for AUD/NZD.

USD/CAD Futures Positioning | COT Report

The Canadian dollar futures market is another one signalling a potential sentiment extreme. Gross short positions among asset managers are nearing a record high at 205k contracts, while net-short exposure among large speculators is also close to a record high at -17.0k contracts.

We're already seeing USD/CAD edge lower, although its momentum lacks the conviction seen behind the NZD/USD rally. However, if the case continues to build for the US dollar rally to stall or retrace in the coming weeks, the odds of a Canadian dollar rebound should increase—which could translate into a deeper pullback in USD/CAD.

Source: CFTC (COT), CME, LSEG

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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