Commitment of traders report (COT): 27th March 2023

Commitment of traders – as of Tuesday 21^st March:

• Net-short exposure to CAD futures fell to its most bearish level since January 2019
• Large speculators were net-short NZD futures for a second week
• Net-long exposure to the US dollar index (DXY) rose gradually for a third consecutive week

Commitment of traders – Canadian dollar futures (CAD):

Traders were quick to offload their exposure to the Canadian dollar following the BOC’s dovish pause. Traders have actually been net-short the currency since late September, but had increased both long and short exposure to 6-year highs ahead of the meeting (seemingly as some sort of hedge). Nearly 42k long bets were closed last week, which is its third largest weekly decline on record, which saw net-short exposure fall by -25.1k contracts to -56.8k contracts.

The question now is whether we’re at or nearing a sentiment extreme. Since 2013, there have been six occasions where net-short exposure reversed higher around the 60-70k short mark. The 2017 trough is the exception which saw net-short exposure fall close to -100k before it reversed higher.

Commitment of traders – as of Tuesday 21^st March:

• Net-long exposure to gold futures rose for a third week to a 7-week high
• Large speculators flipped to net-long exposure to silver futures
• Net-short exposure to palladium futures is at its second most bearish level on record (which the record being set two weeks ago)
• Gross short exposure of managed funds to WTI futures rose to its most bearish level since January 2019

Commitment of traders – Gold futures (GC):

Perhaps not too surprisingly, traders have become increasingly bullish on gold futures. Large speculators increased net-long exposure for a third week to a 7-week high, but managed funds saw a notable drop in gross short exposure and increase of gross longs over the past two weeks.

Moreover, managed funds do not appear to have reached a sentiment extreme, so perhaps gold can make a daily close (and breakout) above $2,000 should it retain its safe-haven status amidst the current concerns of a banking and liquidity crisis.

Commitment of traders – WTI Crude oil future (CL):

Managed funds are their least bullish on WTI futures since January 2016. Gross short exposure spiked higher by 37.4k contracts last week (and 29.4k the week prior) which takes gross-short exposure to its most bearish level since October 2019. It’s worth noting that managed funds have not been net-short WTI since the depths of the 2008 financial crisis, and according to record have remained net-long ever since. So there is a case to be built that perhaps we are approaching a sentiment extreme, as is the case that OPEC do not want prices to drop below $60.

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