Check out this week’s events and trading themes that could drive markets: TThe week ahead
Dealer engagement as of Tuesday, May 23, 2023:
- Traders reduced net long EUR/USD futures exposure by -13.4k contracts (-7.1%).
- Net short exposure to JPY futures rose to a 30-week high
- Net short CHF futures exposure fell to just -903 contracts (the lowest level since September 2021).
- NZD futures traders were on the verge of switching to net long exposure ahead of the RBNZ meeting
EUR/USD Futures: Commitment of Traders (COT)
We have highlighted the potential for sentiment extremes in EUR/USD futures and it looks like the bulls are seriously questioning their net long exposure. A combination of trimmed long positions and new short positions led to a drop in net long exposure in the first week 6, down -13.4k contracts (or -7.1%) at the fastest level in almost a year. 8.7 thousand long contracts were closed and 4.7 thousand long contracts were added. And we see the possibility of more long positions being closed in the coming weeks as bets on a 25 basis point Fed rate hike in June are now at ~655 probability according to Fed fund futures prices.
Dealer engagement as of Tuesday, May 23, 2023:
- Net short exposure to S&P 500 futures hit the second-highest decline on record
- Net long exposure to Nasdaq and Dow Jones futures was reduced for a second week
- Big speculators have expressed bearishness on the 10-year bond futures contract since records began
S&P 500 Futures: Dealer Engagement (COT)
Like EUR/USD, we have warned of a possible extreme sentiment in the S&P 500 futures market. Last week, large speculators were their most bearish on S&P 500 futures, hitting the second highest level on record since late 2007. However, if we look more closely at the data, we can see that the majority of the price rise was driven by short- Covering was declared The last 10 weeks and the long exposure remained largely unchanged. But with such extreme positioning, there is still plenty of room for further gains if short cover and/or long positions cooperate. Since we have a 3 day weekend in the US, markets are closed on Monday. That leaves four days this week to see if the S&P 500 can break last week’s high and target the August 2022 high.
Dealer Commitment as of Tuesday 23 May 2023
- Large speculators reduced net long gold exposure for a second week (fastest weekly pace in three months)
- Managed funds reduced bet-long exposure to gold futures for a third week
- Net short exposure to palladium futures rose to a 4-week high
Gold Futures (GC): Dealer Engagement (COT)
The deal that needed to happen is likely to happen, and that means gold will lose some of its appeal as a safe haven asset. But we’ve already seen traders anticipate it over the past few weeks, as large speculators and managed funds have reduced their gross long gold exposure and increased their short bets. And with Fed fund futures now implying a roughly 65% chance of a Fed rate hike in June, the US dollar has been allowed to rise for a third week, weighing on gold prices. However, Around 1934 there was strong technical support which contributed to a decline despite the stronger US dollar. And we see the potential for a corrective bounce into the 1950-1960 area before we see a break of support.
Frequently asked questions about merchant engagement
What is the COT report?
The Commitments of Traders or COT report is a weekly publication showing the total holdings of various participants in the US futures market. It provides a snapshot of Tuesday’s trading commitments of this week to increase exchange transparency.
COT reports are used across markets so you can get reports on forex, gold, indices and more.
How do you read the Commitments of Traders report?
The Commitments of Traders report consists of tables where each row shows the market and each column shows the open, long and short positions. You can also see which actors have taken a position, including traders, institutions or funds.
The COT is an important source of data for traders as it can provide clues as to whether to take long or short positions in each market.
When will the COT report be published?
The COT report is posted on the CFTC website every Friday at 3:30 p.m. Eastern time. That is 20:30 GMT or Saturday at 7:30 AEST. We provide up to date coverage of the COT report so you can get expert analysis as soon as possible each week.
Comments are closed.