Yen Bears Finally Flip, Can US Dollar Bulls Regain Ground? | COT Report

Futures traders continued to cut US dollar exposure last week, yet the greenback remains firmly net long heading into a major central bank week. The bigger shift came in Japanese yen positioning, where large speculators finally flipped net long for the first time since February. Meanwhile, bearish Canadian dollar exposure continued to ease despite renewed US-Canada trade tensions.

View related analysis:

COT Report: Yen Positioning Flips as US Dollar Longs Retreat

Large Speculator Positioning from the COT report

Source: CFTC (COT), LSEG

US Dollar: Aggregate exposure to the US dollar fell by $7.4 billion to 14-week low $18.1 billion,
EUR/USD: Net-short exposure rose by 17.7k contracts to 42.6k contracts
GBP/USD: The 9.2k weekly increase of net-short among large specs was the most aggressive increase in 11
USD/JPY: Large speculators flipped to net-long yen exposure for the first time since February
USD/CHF: They also increased net-short to the Swiss franc by 7.1k contracts, the fastest weekly pace in 2-years and 2 months
USD/CAD: Net-short exposure to Canadian dollar futures fell to a 15-week low among large specs
AUD/USD: While large specs reduced net-shorts by -4.5k contracts, asset managers increased theirs by 9.7k contracts
NZD/USD: Net-long exposure rose by a combined 20.3k contracts

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

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FX Futures Positioning | COT Report (IMM Data)

US Dollar Index (DXY) Futures Positioning | COT Report

Futures traders have reduced their net-long exposure to the dollar by 63% in just six weeks. Yet they were still long by $18.1 billion heading into last week’s hot PPI and CPI reports. And with traders having since repriced a Fed hike with an 87% probability by Friday’s close, whether the US dollar can extend its bounce may now depend on whether the Fed signals a follow-up hike this week.

Furthermore, asset managers and large speculators were long the US dollar index by a combined 33.6k contracts. But even if the Fed doesn’t signal another hike, traders remain net long the dollar for now.

Source: CFTC (COT), ICE, LSEG

USD/JPY Futures Positioning | COT Report

It took longer than perhaps it should have, but large speculators finally flipped to net-long exposure to Japanese yen futures. You’d have thought the high levels of intervention from the MOF may have seen it happen sooner, but it seems they finally got the message. Renewed bets for a hawkish BoJ also helped.

Still, large specs were only net long by 10.8k contracts, while asset managers are yet to join them, with net-short exposure of 570 contracts. But it bodes well for my assumption that the Japanese yen saw its low for the year back in July, which translates to a major top for USD/JPY.

Source: CFTC (COT), CME, LSEG

USD/CAD Futures Positioning | COT Report

The Canadian dollar rally has failed to break to a fresh high in four weeks, while futures traders remain net short despite expectations for another 25bp Bank of Canada hike and roughly three hikes being fully priced by March. The renewed trade spat between the US and Canada has muddied the outlook, alongside rising global bond yields and increasingly hawkish expectations for major central banks more broadly.

Traders nevertheless continued to trim bearish exposure. Large speculators reduced their net-short position to 70.5k contracts, with longs rising and shorts falling. A similar pattern can be seen among asset managers, suggesting bearish CAD positioning is being unwound even if traders are not yet ready to turn outright bullish.

Source: CFTC (COT), CME, LSEG

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