Technical Analysis Summary - Weekly COT Report Highlights (12 May 2025)
Overview of Market Positioning
The latest Commitment of Traders (COT) report indicates significant positioning trends across major currencies and commodities, particularly focusing on the US dollar (USD), Japanese yen (JPY), Canadian dollar (CAD), and gold futures.
US Dollar (USD)
The USD is currently showing signs of being oversold, with net-short exposure remaining below the -1 standard deviation band for the second consecutive week. This suggests a potential bullish reversal is on the horizon, as the USD index has risen for three weeks, albeit cautiously. Traders are net-short USD futures by approximately $17.6 billion, a slight decrease from the previous week. However, asset managers have increased their net-short positions to the highest level since December 2020, indicating a risk of further weakness in the USD.
Among the FX pairs, USD/CAD is highlighted as a preferred bullish setup, with expectations of breaking above the 1.40 level and potentially reaching 1.41.
Japanese Yen (JPY)
The JPY market is experiencing a sentiment extreme, with large speculators holding net-long positions at record highs. However, there was a slight reduction in net-long exposure by 2.4k contracts last week, alongside an increase in gross-short positions for the first time in five weeks. This shift may indicate a potential change in sentiment, suggesting that bearish positions could start to emerge.
Canadian Dollar (CAD)
The CAD has printed a bearish engulfing candle, signaling a potential reversal. Traders have been net-short on CAD futures for 15 months but have recently reduced their positions as the CAD appreciated. The analysis suggests that a downward move in the CAD is underway, with expectations for USD/CAD to break above key resistance levels.
Gold Futures
Gold futures are showing a divergence between net-long positions and actual prices, with large speculators reducing their long positions to a 14-month low. Despite this, short positions remain low, indicating that traders are not likely to bet against gold in the near term. A pullback in gold prices is anticipated, potentially moving towards the $3,000 level to attract sidelined bulls back into the market.
Conclusion
The COT report highlights significant positioning trends that could influence market movements in the coming weeks. The USD appears to be on the verge of a bullish reversal, while the JPY and CAD show signs of potential shifts in sentiment. Gold remains under pressure, with traders cautious about long positions. Monitoring these trends will be crucial for making informed trading decisions.