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Commitment of Traders Report (COT): Bears Pile into Silver, GBP and JPY

Commitment of traders – as of Tuesday 13th of September:

  • Traders increased their net-long exposure to US dollar against G10 currencies by $1.2 billion
  • Net-short exposure to GBP and JPY futures rose to a 14-week high
  • Net-long exposure to CAD futures fell to an 8-week low
  • Traders were their most bearish on 2-year treasury notes in 17-months

US 2-year treasury note:

US bond yields have continued to rise in an almost parabolic fashion, with the 1-year note now just shy of 4%, and the 2-year at 3.8% (and above the 10-year yield of 3.45%) with an increasingly inverted yield curve. And large speculators are not shy in capitalising on these lower bond prices – which move inversely to bond yields. Last week they were net-short the 2-year treasury note by -358k contracts, which is their most bearish position since April 2021.

However, if you look back at net-short exposure over time (white line) it could be argued it is approaching a sentiment extreme.

  • Net-short exposure hasn’t ever spent much below -350k.
  • It’s 3-year Z-score is -2.3 standard deviations (SD)
  • Its 1-year SD is 2.9
  • There are 4.6 bears for every bull.

But to try and pick a top in yields (or a low in bond prices) with some banks now forecasting the Fed to raise rates to 5% next year, it would take a brave (or ill informed) trader to try and fight this trend. But what we can at least see is that traders seem confident that yields could rise further, even at a potential sentiment extreme.

Commitment of traders – as of Tuesday 13th of September:

  • Traders reduced net-short exposure to silver at their fastest weekly pace in 6-months
  • Large speculators decreased net-long exposure to gold for a fifth consecutive week
  • Managed funds were net-short for a second consecutive week

Silver futures (SI):

Whilst commodities were broadly under pressure from the US dollar last week, silver posted a 2% gain. And it appears partly down to short-covering alongside an increase of bullish interest. Large speculators closed -6.5k contracts and 1.7k long contracts were opened. This saw net-short exposure rise at its fastest weekly pace in 6-months. Managed funds also added 4.5k long contracts and closed -11.9k short contracts. So we’ll watch silver prices to see if it can break back above $20 before reverting to a bullish bias.
DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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