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EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off – COT Report

US Dollar, EUR/USD, GBP/USD, COT Report –Analysis

  • US Dollar Shorts Ease Despite Weak Price Action
  • EUR/USD Sentiment Improves
  • Traders Caught Offside Amid Equity Exuberance

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EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

Source: CFTC, DailyFX (Covers up to June 2nd, released June 5th)

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EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off – COT Report

The latest reporting week sees investors marginally reduce their shorts in the US Dollar, despite the sizeable pullback in the greenback as the risk rally dominated price action. In turn, this signals that traders have been caught offside by the seemingly excessive exuberance seen in risk appetite.

The Euro saw net longs rise by over $1bln to $11.3bln as speculators continued to cut back on outright shorts. Sentiment remains supportive of the Euro as the recent recovery fund proposal and monetary policy stimulus propels the currency higher, which in turn has seen sovereign risks recede.

Positioning in the Pound has grown increasingly bearish as specs continue to sell into strength with net shorts at its largest since December 2019 amid a $1.1bln rise in bearish positions, marking a 6th consecutive weekly rise in shorts. However, given that GBP/USD has jumped to its best level since mid-March amid the all-round weaker USD in light of the risk rally, shorts appear to be feeling the squeeze, which can fuel a further rise in spot prices as investors cover positions. That said, we will be placing a close eye on EU-UK related headlines in the run-up to the transition period extension deadline (June 30th ), which may see rising Brexit risk premiums curb further upside in GBP.

Across commodity-linked currencies, positioning changes were relatively muted, however, speculators have remained bearish despite the sizeable appreciation in recent weeks. Although, with the risk-on rally potentially reaching somewhat stretched levels after the S&P 500 broke above 3200, while the Nasdaq 100 printed a fresh record high, the best days seem to be behind us for high-beta currencies.

Bullish bets in the Japanese Yen had been cut by $275mln led by a pick up in outright shorts, although, with JPY net longs remaining stretched (4yr highs), there is a risk of a return to 110.00 as specs continue to trim long positions.

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

US Dollar |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

EUR/USD |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

GBP/USD |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

USD/JPY |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

USD/CHF |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

USD/CAD |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

AUD/USD |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

NZD/USD |

EUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT ReportEUR/USD Bulls Boosted, US Dollar Shorts Ease Despite DXY Sell-Off - COT Report

For a more in-depth analysis on FX, check out the FX Forecast

— Written by Justin McQueen, Market Analyst

Follow Justin on Twitter @JMcQueenFX