Technical Analysis Summary - Weekly COT Report Highlights (12 May 2025)
The latest COT report highlights significant positioning trends in major currencies and gold futures, indicating potential market movements.
US Dollar (USD)
The US dollar 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, as the USD index has risen for three weeks, albeit cautiously. Traders are net-short USD futures by -$17.6 billion, a slight decrease from the previous week. However, asset managers have increased their net-short exposure to the highest level since December 2020, indicating a risk of further weakness in the dollar.
Japanese Yen (JPY)
The Japanese yen has reached a sentiment extreme, with large speculators pushing net-long exposure to record highs. However, there was a slight reduction of 2.4k contracts last week, and for the first time in five weeks, gross-short exposure has increased by 3.6k contracts. This could signal a shift in sentiment, suggesting that bears may start to enter the market.
Canadian Dollar (CAD)
The Canadian dollar has printed a bearish engulfing candle, indicating a potential reversal. Traders have been net-short CAD futures for 15 months but have recently reduced their net-short positions as the CAD appreciated. The analysis suggests that USD/CAD could break above the 1.40 level and potentially reach 1.41.
Gold Futures
Gold futures are experiencing a divergence between net-long exposure and prices, with large speculators reducing their long positions to the lowest level in over a year. Despite this, short positions remain low, indicating that traders are not likely to bet against gold in the near term. A pullback in prices may be necessary to attract sidelined bulls back into the market, with a potential move towards the $3,000 level being discussed.
Conclusion
Overall, the COT report indicates significant positioning trends that could influence market movements in the coming weeks. The US dollar shows potential for a bullish reversal, while the Japanese yen and Canadian dollar are at critical junctures. Gold's positioning suggests a cautious outlook, with the possibility of further price adjustments needed to entice buyers back into the market.