Technical Analysis of Currency and Commodity Markets

This report provides a technical analysis of the major currency and commodity markets, based on the latest Commitment of Traders (COT) reports.

JPY/USD

The yen has been one of the strongest major currencies in recent weeks, and this is reflected in the COT data. Large speculators have increased their net-long exposure to JPY futures by 23.3% in the past week. This suggests that they believe the yen is undervalued and that it has further room to appreciate.

Asset managers have also trimmed their net-short exposure to JPY futures, which further supports the bullish outlook for the yen.

EUR/USD

The euro has been under pressure in recent weeks, and this is reflected in the COT data. Large speculators have increased their net-short exposure to EUR/USD futures by 196.8k contracts in the past week. This is the largest increase in short exposure since the pandemic.

Asset managers have also added to their net-short exposure to EUR/USD futures, although to a lesser extent than large speculators.

The COT data suggests that large speculators are bearish on the euro and that they believe it is overvalued. This could lead to further weakness in the euro in the coming weeks.

Commodity FX

The COT data suggests that commodity currencies such as AUD/USD, NZD/USD and USD/CAD could be approaching an inflection point. Large speculators have reduced their net-long exposure to these currencies in recent weeks, which suggests that they are less bullish than they were previously.

This could lead to a period of consolidation or even a correction in commodity currencies. However, it is important to note that the COT data is a backward-looking indicator, and it is possible that large speculators have already changed their positions.

Metals

The COT data suggests that net-long exposure to metals remains within a ‘cooling off’ period. Large speculators and asset managers have been hesitant to chase the recent rally in gold prices, and this could lead to further weakness in the precious metal in the coming weeks.

Copper prices have also failed to regain bullish traction despite stimulus from Beijing. This is reflected in a lacklustre level of net-long exposure to the metal.

Conclusion

The COT data provides valuable insights into the positioning of large speculators and asset managers. This information can be used to identify potential trading opportunities. However, it is important to remember that the COT data is a backward-looking indicator, and it is possible that large speculators have already changed their positions.