Market Sentiment

Gold futures traders waded into the metal ahead of the record high set last week. But if we adjust large speculative positioning for open interest, it turns out they reached a record level of bullish exposure five weeks ago.

Large speculators surged into GBP/USD long bets last week, pushing net-long exposure to a record high and at the fastest weekly pace since records began. They also continued to trim net-short exposure to yen futures for a second week, after it nearly reached a record high of its own.

Large speculators flipped to net-long exposure to EUR/USD futures after a 2-week hiatus, whilst AUD/USD breached the bullish threshold for the first time in three years according to the commitment of traders report (COT).

Large speculators were on the cusp of reaching a record level of net-short exposure to yen futures last week, whilst they're also getting close to reaching net-long exposure to AUD/USD futures.

Large speculators flipped to net-short exposure to EUR/USD ahead of the French election. Open interest on CAD futures fell at its fastest pace in nearly one year as the sentiment extreme we warned of plays out. Net-long exposure to AUD/USD futures fell to a 3-year low, and prospects of net-long exposure are now on the horizon with the potential for an RBA hike.

Bears were busy last week as they piled into shorts against EUR/USD and the Dow Jones, and also reached a record level of net-short exposure to the Canadian dollar. And this was beneficial for USD bulls.

Traders may have reduced net-long exposure to USD futures in aggregate, but they remain net-long and a bullish reversal week formed on the USD index. We also take a look at GBP/USD, gold, WTI crude oil and US indices positioning (S&P 500, Dow Jones, Nasdaq 100).

When open interest on the VIX rises at its second largest weekly pace on record, it’s best to take notice. Especially when it reached a 5-year low before snapping a 4-week losing streak. We also take a look at positioning on the USD index, EUR/USD, GBP/USD, NZD/USD, gold and WTI crude oil.

The commitment of traders (COT) report shows how large speculators are positioned across futures markets on the CME exchange.

An increase of bearish bets against AUD/USD pushed net-short exposure to a record high among large speculators.

With a BOE and FOMC meeting pending and net-long exposure for GBP/USD at or near a sentiment extreme, I cannot help but wonder if the pound it due at least a pullback. I also take a closer look at the US dollar index (DXY), gold and the Nasdaq 100.

The reversal on USD/JPY did not come without warning, as traders had reached a record level of net-short exposure. And whilst USD/JPY may be due for a bounce, further downside potential remains.

Short exposure to the Japanese yen continues to venture towards the extreme, which suggests USD/JPY could fast be approaching a reversal.

Traders remained net-long US dollar index futures last week, although asset managers have the more convincing bullish view for the dollar.

With the USD showing signs of a potential pullbacks and JPY futures nearing a potential sentiment extreme, USD/JPY may well struggle to break and hold above 152. EUR/USD also looks set to bounce despite lower net-long exposure, and gold future may struggle to hold above $2000 given the rise in short and trimming of long bets.

Traders increased their bearish exposure to EUR/USD futures at their fastest pace in 20 months last week, and large speculators increased their net-long exposure to US dollar index futures despite being on the cusp of flipping to net-short exposure the week prior.

Bears continued to initiate fresh short bets against the Japanese yen, which points to further potential strength ahead of USD/JPY. Gold bulls trimmed longs for gold futures, and shorts continued to fall for crude oil.