Technical Analysis of EUR/USD, JPY/USD, and Commodity FX

According to the COT report, traders are increasingly long the US dollar and short EUR/USD. This could pave the way for a sub-parity euro next year.

EUR/USD

Large speculators increased their net-short exposure to EUR/USD futures to a four-year eight-month high last week. They also increased gross shorts for a fourth week and to highest level in two years and three months. This suggests that traders are bearish on the euro and expect it to continue to decline against the US dollar.

JPY/USD

Asset managers flipped to net-long exposure to JPY/USD last week, while large speculators were net-long for a second week. However, speculative volumes were lower for a third week, suggesting that short covering has been the main culprit behind the net-long status. With yen prices weakening for a second week, it is not clear whether traders will remain net long.

Commodity FX

Traders had a more bearish view of commodity FX futures last week, with both sets of traders increasing their net-short exposure for NZD and CAD futures while reducing net-long exposure to AUD futures.

• Large specs and managed funds were their most bearish on NZD/USD futures in five years.
• Open interest hit a record high on CAD futures and net-short exposure is approaching its record high among both sets of traders.
• Large speculators reduced their net-long exposure to AUD/USD futures to an 11-week low while asset managers increased their net-short exposure to a sixteen week high.

Overall, the COT report suggests that traders are bullish on the US dollar and bearish on the euro, yen, and commodity currencies. This could lead to further weakness in the euro and yen, and strength in the US dollar in the coming months.