US Dollar Bulls Charged Into FOMC, Yen Shorts Intensified | COT Report

Futures traders aggressively increased bullish US dollar exposure ahead of last week's FOMC meeting, driving the largest weekly increase in net-long USD positioning in more than seven years. At the same time, large speculators flipped net-short on the Australian dollar for the first time since January, bearish Canadian dollar bets continued to build, and yen positioning became increasingly crowded. The positioning data show traders increasingly backing a stronger US dollar while adding bearish exposure to commodity-linked currencies such as the Australian and Canadian dollars.

View related analysis:

FX Futures Positioning: USD Longs Surged, AUD/USD Turned Bearish and CAD Shorts Built Further

Large Speculator Positioning from the 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.

US Dollar: The $11.4 billion increase in net-long exposure to the US dollar was its fastest in more than seven years.
EUR/USD: Gross shorts in euro futures held by asset managers rose to a near four-year high of 189.7k contracts.
GBP/USD: Traders increased net-short exposure to British pound futures by a combined 11.1k contracts.
USD/JPY: Gross long positions in yen futures reached another record high, although the pace of accumulation slowed considerably.
USD/CHF: Net-short exposure to the Swiss franc among large speculators rose to a 13-week high of 40.3k contracts.
USD/CAD: Large speculators and asset managers increased their net-short exposure to Canadian dollar futures to a six-month high.
AUD/USD: Large speculators flipped to a net-short position of 4.1k contracts for the first time since January.
NZD/USD: Net shorts among large speculators rose by 13.5k contracts to 45.2k, their fastest weekly increase since December.

Asset Manager Positioning | COT Report

Source: CFTC (COT), LSEG

FX Futures Positioning | COT Report (IMM Data)

US Dollar Index (DXY) Futures Positioning | COT Report

Traders were more than happy to front-load their bullish US dollar bets heading into last week’s FOMC meeting. And those bulls will feel vindicated with the level of hawkishness delivered, with Fed fund futures now pricing in a 25bp hike as soon as September and another one potentially in December.

An $11.4 billion increase to the US dollar on the futures market pushed net-long exposure to a 16-month high of $27 billion, marking its fastest weekly increase in over 7 years.

US Dollar Bulls Gain Conviction as Short Covering Accelerates

Short covering was a major theme last week on the US dollar index. Largs speculators reduced gross-shorts by -8.5k contracts, their fastest pace since June 2024. Gross-longs were also increased to a 19-month high of 31.6k contracts.

Asset managers increased their net-long exposure to US dollar index futures by 1.8k contracts to 18.4k, their most bullish level since January 2025.

Note the bullish engulfing week on the US dollar index futures chart. The fact that net-long exposure is not yet at a sentiment extreme, the Fed are hawkish and the US dollar index is only a touch above 100, betting against the USD could prove painful for the foreseeable le future.

Source: CFTC (COT), ICE, LSEG

USD/JPY Futures Positioning | COT Report

I have been ringing the alarm bells on the Japanese yen's stretched positioning for several weeks. While gross longs among large speculators and asset managers reached fresh record highs again last week, the pace of accumulation slowed considerably.

Futures traders are likely well aware they may be pushing their luck from a positioning perspective, while also flirting with the threat of intervention. That said, I recently outlined a case for the MOF to turn a blind eye while dominant forces continue to bid the US dollar. But should any meaningful USD bearish signal emerge, the MOF may well pounce and send the yen soaring.

Given the stretched positioning, market forces may ultimately do the work of the MOF for them. A reversal in yen sentiment could see capital flow from USD/JPY into other FX majors, helping to cap upside for the pair or even send it lower should a suitable catalyst emerge.

Source: CFTC (COT), CME, LSEG

USD/CAD Futures Positioning | COT Report

Canadian dollar sentiment continues to deteriorate. Large speculators and asset managers increased gross short exposure while trimming longs, reinforcing a bearish bias towards the loonie.

While positioning is becoming increasingly one-sided, net-short exposure is not yet at levels typically associated with a sentiment extreme. That suggests there is still room for traders to add bearish CAD exposure, particularly if the Fed's hawkish pivot continues to underpin the US dollar.

At the same time, traders should remain mindful of the crowded nature of the trade. Any signs of a softer US dollar or improvement in risk sentiment could trigger bouts of short covering and a corrective pullback in USD/CAD. For now, however, futures positioning remains consistent with a stronger USD and a weaker Canadian dollar. But that doesn’t mean USD/CAD cannot pullback over the near-term, given its extended price action on the daily chart.

Source: CFTC (COT), CME, LSEG

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AUD/USD Futures Positioning | COT Report

Large speculators flipped to net-short exposure in Aussie futures for the first time since mid-January. And that was before the RBA delivered a less hawkish hold than some had expected. Asset managers had already flipped to net-short exposure two weeks earlier, with both groups piling into bearish bets for a second consecutive week. Large speculators increased short exposure by 18%, while asset managers increased theirs by 21%.

This does little to derail my hunch that AUD/USD could fall towards 69 cents before the rally regains strength later in the year.

Source: CFTC (COT), CME, LSEG

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge

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