Positioning on the US dollar continues to suggest an oversold market. USD/CAD is rebounding in line with my bias, and large speculators have began betting against the Japanese yen.
By : Matt Simpson, Market Analyst
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Weekly Market Positioning Overview – COT Report Highlights (6 May 2025)
- US Dollar (USD): Net-short exposure remained below the lower -1 standard deviation band for a second consecutive week, suggesting an oversold condition.
- Japanese Yen (JPY): While net-long exposure edged lower by 2.4k contracts, large speculators’ positioning remains near a record high—indicating a potential sentiment extreme.
- European Dollar (EUR): Net-long exposure among large specs was effectively flat on the week, asset managers increased net-long exposure to EUR/USD futures by 5.3k contracts.
- Swiss Franc (CHF): Large speculators reduced net-short exposure to CHF futures to a 20-week high
- Australian Dolar (AUD): Large speculators reduced net-long exposure to an 8-week low
- Gold: Net-long exposure among large speculators and asset managers fell to a 14-month low.
US Dollar Positioning: Weekly COT Report and IMM Data Insights
I’ve been calling for a bullish reversal in the US dollar in recent weeks, so it’s encouraging to see the USD index rise for a third consecutive week—even if gains remain cautious. Still, with both the US and China independently stating that trade talks have so far progressed well, we could be getting closer to a deal. That, in turn, may help alleviate some of the selling pressure that has weighed on the US dollar in recent months.
Traders were effectively net-short USD futures by -$17.6 billion last week—a slight reduction of $0.6 billion from the week prior. Notably, net-short USD exposure remained below the lower 1-standard deviation band for a second straight week—an oversold level the dollar typically doesn’t remain in for long.
However, asset managers increased their net-short exposure to the US dollar index to its highest level since December 2020, which serves as a reminder to stay alert to the risk of further USD weakness beyond the anticipated retracement.
Of the FX majors, USD/CAD remains my preferred pair for bullish setups at this stage.
Click the website link below to read our exclusive Guide to USD/JPY trading in Q2 2025
https://www.cityindex.com/en-au/market-outlooks-2025/q2-usd-jpy-outlook/
JPY/USD Positioning: Japanese Yen Futures – Weekly COT Report
The Japanese yen is another forex market I’ve been flagging as reaching a sentiment extreme, so it’s encouraging to see USD/JPY rise for a third consecutive week. Large speculators have recently pushed net-long exposure to record highs, although last week saw a slight reduction of 2.4k contracts.
It’s also worth noting that large speculators increased gross-short exposure to yen futures for the first time in five weeks, by 3.6k contracts. While this may not signal an outright shift in sentiment, it’s a start—and bears need to enter the market somewhere.
CAD/USD Positioning: Canadian Dollar Futures – Weekly COT Report
The Canadian dollar printed a bearish engulfing candle last week, which translates to a bullish engulfing week for USD/CAD. Traders have remained net-short CAD futures for 15 months, although in recent months they’ve reduced their net-short exposure while the Canadian dollar appreciated—aligning with my broader bias. I’ve been anticipating a reversal lower in the CAD, and that move now appears to be underway.
While I previously outlined a 1.40 target for USD/CAD, I now suspect prices will break above this key level and head towards at least 1.41.
Click the website link below to read our exclusive Guide to gold trading in Q2 2025
https://www.cityindex.com/en-au/market-outlooks-2025/q2-gold-outlook/
Gold Futures Positioning (GC): Weekly COT Report Analysis
The divergence between net-long gold exposure and gold prices continues to widen, with large speculators and managed funds steadily reducing their long positions. With a combined net-long exposure of approximately 264,000 contracts, traders are now the least bullish on gold futures in over a year.
It’s worth noting that short positions remain low and are not showing signs of trending higher. I also doubt we’ll see traders actively bet against gold anytime soon. However, prices may need to come down further to entice some of the side-lined bulls back into the market.
Price action also suggests that a pullback could be due—perhaps a move towards the $3,000 level could be on the cards.
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