Commitment of traders report (COT): Traders most bullish on DXY in 5-years

Commitment of traders – as of Tuesday 21^st June 2022:

• Traders were net-long the US dollar by $15.5 billion, according to the IMM (International Monetary Market).
• Large speculators were their most bullish on the US dollar index since March 2017.
• Euro futures were net-short for a second consecutive week, and at the most bearish level since December.
• Net-short exposure to Japanese yen futures fell to its least bearish level since March.

US dollar index (DXY) futures:

Traders continued to pile into the US dollar index last week which has sent net-long exposure to a fresh 5-year high. However, this has mostly been a function of short covering as both gross long and gross shorts have been trimmed over the past two weeks – only shorts have been trimmed at a faster rate than longs. This means open interest is also lower for a second consecutive week.

We have also noted that net-long exposure is around 45k contracts, so one could argue it is approaching a sentiment extreme. Yet with the Federal Reserve seemingly set to hike interest multiple times over the next several meetings, it is hard to build a bearish case for the US dollar. But perhaps we have seen the stronger part of its bullish move.

Japanese yen (JPY) futures:

Net-short exposure to Japanese yen futures fell to their least bearish level since March. Gross longs have risen for four consecutive weeks and gross shorts are at a 15-week low. Traders are likely wary of being heavily short the yen due to speculation there will either be an FX intervention to strengthen the yen, or adjust their YCC (yield curve control target) which could also spur bouts of volatility for yen pairs.

Commitment of traders – as of Tuesday 21^st June 2022:

• Traders reduced net-long exposure to WTI crude futures by -13.4k contracts.
• Short exposure for gold futures were trimmed by both large speculators and managed funds.
• Large speculators increased their net-short exposure for a second week and have remained net-short for 9-weeks.
• Gross shorts for silver futures were trimmed at their fastest pace since October (-7k contracts).
• Large speculators were their most bearish on palladium futures since December.

Copper futures (HG):

Concerns that we may be headed for a global recession saw copper futures fall as much as -11.8% last week – during its worst week since March 2020. It saw a firm close below $4.00, a level it has not breached since August last year. Last week gross longs fell to their least bullish level since May 2020 and gross shorts rose for a second consecutive week. And it’s likely that short interest has continued to rise as it was compiled the day before prices broke below $4.00. Some reports also suggest that Chinese companies have a grim outlook on copper prices, so further losses over the coming week are a potential scenario whilst prices remains below $4.00.

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