Head of Commodity Strategy
In FX, despite posting only a modest gain during the reporting week, momentum-driven buying of the US dollar extended into a second consecutive week. As a result, the gross long dollar position against eight IMM currency futures rose 57% to USD 16.5 billion, just below the multi-month high reached in early April. At the individual currency level, speculative selling was concentrated in the JPY, AUD, and CAD, with more moderate selling seen in the EUR. Meanwhile, modest demand emerged for the CHF, GBP, and NZD.
In the latest COT reporting week to 26 May, growing confidence in a potential US-Iran peace deal helped drive the Bloomberg Commodity Index 4% lower, with only six of the 25 major commodity futures tracked in this report posting gains. At the sector level, energy slumped more than 9%, while agriculture fell 3.5%, more than offsetting gains across industrial and precious metals. As the dust settled on a busy, albeit holiday-shortened week, all but three contracts registered net selling, led by crude oil, natural gas, soybeans, corn, and cattle. In energy, the combined WTI and Brent crude oil net long was reduced for a fourth consecutive week to 370,000 contracts, a two-month low and roughly one-third below the mid-March peak. Notably, the reduction reflects both long liquidation and fresh bearish positioning, with the gross long declining by 83,000 contracts while the gross short increased by 100,000 contracts. Elsewhere, positioning changes across refined products were mixed, while the natural gas net short expanded to its largest level in two years. In metals, gold saw a modest amount of short covering ahead of another failed attempt to force prices below the 200-day moving average. Silver and platinum both experienced net selling, while copper—one of the week's strongest performers—recorded a small reduction in its net long, driven primarily by fresh short selling. In agriculture, weakness across grains and soybeans, driven by lower energy prices and improving US crop weather prospects, triggered substantial profit-taking across all six major contracts. Combined, the sector's net long fell by 146,000 contracts to 667,000, just three weeks after reaching a record high of 874,000 contracts. Across soft commodities and livestock, all contracts experienced net selling, led by sugar as well as recent high-flyers cotton and lean hogs.
The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.
Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other
Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other
Forex: A broad breakdown between commercial and non-commercial (speculators)
The main reasons why we focus primarily on the behavior of speculators, such as hedge funds and trend-following CTA's are:
Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.
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