CoT Weekly Sentiment Update – EUR/USD, USD/JPY, Crude Oil & More

CoT Highlights:

Large speculators remain very long both the euro and crude oil
Japanese yen large speculators may be on to new trend
Large spec profile updates for major currencies/markets

See how sentiment ties into the DailyFX Q2 Forecasts.

The report posted on Friday did not show any significant one-week changes, but there are still notable positions in a few key markets to keep an eye on as time progresses. We have been watching the extremes in the euro and crude oil for a while now, however, they have meant little from an overbought standpoint, but remain worth keeping in mind in the event we do see a turnaround in price. Two weeks ago, large specs in the Japanese yen turned net-long for the first time since late 2016, a trend seen having potential to mature in the weeks and months ahead.

Every Friday, the CFTC releases a weekly overview of traders’ positioning in the futures market as reported for the week ending on Tuesday. In the table below are key statistics for net positioning of large speculators (i.e. hedge funds, CTAs, etc.). This group of traders are largely known to be trend-followers due to the strategies they typically employ. The direction of their position, magnitude of changes, as well as extremes are taken into consideration when analyzing what their activity could mean about future price fluctuations.

Key stats: Net position, one-week change, and where the current position stands relative to the past 52 weeks.

Large speculators remain very long both the euro and crude oil

Large speculators continue to hold a near-record long position in the euro despite the lack of movement over the past three months. Discouragement is minimal so far. Once we see a break from the range (it could come at any time), we should finally see a material change in their positioning.

A breakout above the 2008 trend-line in the mid-12400s may garner more interest, but it is unclear how much more given how long the market already is. A breakdown below support, with the 2017 high at 12092 seen as the final threshold, could have a largely bullish market liquidating quickly and as a result a sharp drop in the price of EUR/USD. For technical details, see this week’s euro tech forecast.

For shorter-term sentiment readings, see the IG Client Sentiment page.

Chart 1 – Euro Positioning

At 707k contracts long, large speculators remain quite bullish crude oil. Since November, their positioning has been hanging out in record territory – very long and very right. While it has been viewed as a potential sign of caution, positioning has yet to be a headwind for higher prices. Until we see a clear change in price action, we must respect the upward trend.

Chart 2 – Crude oil Positioning

Japanese yen large speculators may be on to new trend

Last week, we discussed the fresh net-long position in the Japanese yen contract, noting that it could be the beginning of a broader move for the currency. The 2.8k contracts long is essentially a flat position, but watch how it changes as USD/JPY positions itself to turn back down (more yen strength). The unusually tight range created in 2017 broke to start the year, putting the yen very much at risk of continuing to trade in the direction of the breakout.