Commitments of Traders data show the Japanese yen registering the largest weekly swing in Commercial net positioning, with a 49% shift that points to near-term downside pressure versus the US Dollar. The longer view is less one-directional: iCOT Scores indicate a one-year extreme while a prior five-year bullish extreme had earlier underpinned a rise, and positioning has since retreated without forming an equivalent bearish long-term reading. The New Zealand dollar also saw an elevated weekly Commercial move, at 19%, but the picture is split, with a slightly bullish iCOT reading set against a more bearish five-year backdrop.
Outside FX, copper has reached an all-time bearish COT extreme in both Large Speculator and Commercial net positions, a setup that has historically coincided with stress and, at times, weaker pricing, though “commercial capitulation” can prolong rallies. Soybeans show a similar all-time bearish extreme, which can persist for weeks or months and does not impose immediate price reversal. Natural gas remains historically stretched on the bullish side, with extremes spanning 339 reports for Large Speculator net positions and 342 reports for Commercial net positions; a comparable 2020 episode took months before a sharper advance.
Near-Term FX Risks and Trade Opportunities
We should brace for near-term weakness in the Japanese Yen after a massive 49% weekly shift in commercial net positioning. While the Bank of Japan’s shifting rate policies have supported the Yen over the medium term, this sharp short-term signal suggests the US Dollar could push the currency pair back toward the 145 level in the coming weeks. We recommend that derivative traders look for tactical short-term opportunities on the Yen while keeping a supportive bias for the longer horizon.
We see a similarly mixed picture in the New Zealand Dollar, where a 19% weekly commercial shift hints at near-term bearishness. However, because these signals conflict across different timeframes, we should avoid trading the Kiwi in isolation right now. Instead, we advise cross-checking this market with the Australian Dollar and the US Dollar Index to find a clearer trend.
Commodities at Positioning Extremes
Copper has just reached an unprecedented, all-time bearish Commitment of Traders (COT) extreme. Historically, when speculator and commercial positions stretch this far, a sharp price correction often follows. With global copper prices hovering around $4.20 per pound amid fluctuating global industrial demand, we should treat this positioning as a major warning sign rather than an invitation to buy.
However, we must remain cautious of commercial capitulation, which can temporarily push prices higher before a true reversal occurs. During previous extremes, short-sellers have sometimes been squeezed out of their positions, causing a final, explosive leg up. For now, we suggest derivative traders tighten their stop-losses on long copper positions rather than aggressively shorting the market immediately.
Soybeans are displaying a nearly identical all-time bearish extreme, making the agricultural market highly vulnerable to a sudden downturn. Similar to the market behavior we saw back in October 2020, extreme positioning can persist for a while, but the risk-to-reward ratio for long positions is no longer favorable. We believe the smartest move right now is to lock in profits on any remaining long soybean contracts.
In contrast, Natural Gas is sitting at a historically massive bullish extreme. With US Henry Hub natural gas trading at relatively low levels near $2.30 per MMBtu, a significant upward move is highly probable as we head closer to the winter season. However, we should be patient, as historical data shows that similar setups in 2020 took several months to finally trigger a major rally.
Ultimately, we must remember that these positioning extremes are structural maps of risk, not precise timing clocks. We need to wait for actual price action to confirm these turns before committing large amounts of capital. By separating our short-term tactics from our long-term strategies, we can avoid being caught on the wrong side of these highly crowded trades.
