FX positioning turned more defensive, led by JPY and EUR. JPY saw the largest weekly deterioration, with net positioning down 29,462 contracts to a 152,125-contract short, near the 3rd historical percentile, while USD/JPY rose 0.57%. EUR followed as net exposure fell 28,733 contracts to a 41,338-contract short and EUR/USD slipped 0.19%. AUD selling extended for a ninth week even as AUD/USD gained 0.33%, and GBP covered for a fourth week with net positioning up 15,692 contracts, but sterling fell 0.13%.
WTI produced the strongest positive cross-asset alignment. After eight weeks of selling, speculative net positioning rose 19,006 contracts as crude climbed 7.02%; the net long stands at 81,689 contracts, near the 7th historical percentile, and equals 4.4% of open interest. Elsewhere, gold positioning fell for a second week while spot added 0.55%; VIX shorts increased 11,078 contracts as volatility eased 1.54%. Coffee prices dropped 1.56% as positions softened, while CAD saw a small positioning improvement after ten selling weeks even as the currency weakened.
Defensive Currency Positioning Favors JPY and EUR Shorts
We see a strong defensive shift in the currency markets, making it the right time to align with renewed bearish momentum in the Japanese Yen and the Euro. The Yen’s net short positioning has plunged to a massive 152,125 contracts, placing it near its lowest 3% of historical readings as USD/JPY climbs. We should look to short JPY and EUR on rallies, especially since the Euro’s net short positions have quickly rebuilt to over 41,000 contracts.
WTI Crude Rally Stands Out; Caution on AUD and GBP
The cleanest opportunity right now is in WTI crude oil, where we are witnessing a powerful positive reversal after two months of steady selling. Crude prices recently surged over 7% in a single week, backed by a significant 19,006-contract increase in speculative net longs. Because net long exposure is sitting near its historical 7th percentile—accounting for just 4.4% of total open interest—we have ample room to buy into this rally before the market gets crowded.
We must exercise extreme caution with the Australian Dollar due to a glaring divergence between price action and trader positioning. Despite speculators selling AUD for nine consecutive weeks, the currency actually managed to gain 0.33%, signaling strong underlying support. We advise against adding new short positions here, as this resilient price action suggests a major short-squeeze risk is brewing.
The British Pound also requires a patient approach as its recent recovery lacks solid backing. While short-covering has lifted net exposure by more than 15,000 contracts, the spot price actually slipped 0.13% over the same period. We should wait for clearer price confirmation before chasing GBP higher, as this disconnect points to potential downside risk in the coming weeks.
