Forex COT Report: May 23, 2025

Forex Market Overview: May 23, 2025

This week’s Commitment of Traders (COT) report, published by the Commodities Futures Trading Commission (CFTC), reveals significant shifts in market sentiment across major Currency Pairs. Data is current through Tuesday, May 20th, offering insights into the positioning of large market participants – speculators and commercial traders – in the Forex Market. Remember, all positions are relative to the US dollar; a long position in the EUR/USD Currency Pair, for example, represents a bet on the euro’s appreciation against the dollar.

Weekly Speculator Changes: A Bearish Turn for Most

This week’s COT data paints a predominantly bearish picture, with a notable reduction in speculator contracts across ten out of the eleven Currency Pairs we track. Only the US Dollar Index bucked this trend, showing a modest increase of 69 contracts. The most significant declines were observed in the Canadian Dollar (-21,705 contracts) and the Brazilian Real (-17,226 contracts), highlighting a potential shift in Market Sentiment for these specific Base Currencies. Other notable decreases include the EuroFX (-10,321 contracts), Australian Dollar (-9,731 contracts), and Japanese Yen (-4,938 contracts). Understanding these shifts is crucial for effective Forex Trading strategies.

Currency Speculator Position Roundup: A Mixed Bag

While the overall trend showed a pullback in speculator positions, except for a minor increase in the US Dollar Index, the broader picture is more nuanced. Many currencies still maintain a bullish stance against the US Dollar. The Japanese Yen, for instance, remains near its all-time high of +179,212 contracts (reached April 29th), demonstrating persistent bullish sentiment. Similarly, the Euro, with approximately +75,000 contracts, has held a bullish position for 11 consecutive weeks, suggesting strong underlying support. This long-term bullish trend, however, needs to be considered alongside the recent weekly dip.

The Mexican Peso, largely bullish since 2023, currently sits at around +62,000 contracts, exceeding its 2025 average of +34,000. Comparing this to its 2024 average of +68,482 (which included a remarkable 15-week streak above +100,000 contracts), reveals a potential cooling of bullish momentum. This highlights the importance of considering both short-term and long-term trends when developing your Forex Strategy.

The Brazilian Real, despite a weekly decline in speculator bets, remains bullish for the 16th consecutive week, holding over +26,000 contracts and recently achieving an all-time high. Conversely, the Swiss Franc, New Zealand Dollar, Australian Dollar, Canadian Dollar, and Bitcoin currently show negative speculator positions against the US Dollar. This diverse landscape emphasizes the need for careful analysis of individual Currency Pairs.

Deep Dive: Euro Speculator Bets

The Euro experienced a significant pullback this week, losing over 10,000 contracts – its largest decline since early April. However, this should be viewed within the context of a strong upward Trend since February. Over the past 14 weeks, the Euro has seen gains in 10 weeks, accumulating a total increase of +138,000 contracts. This substantial 14-week rise transformed the position from -64,425 contracts on February 11th to +74,453 contracts this week. Traders should consider using Technical Analysis indicators like the RSI, MACD, or Moving Averages to identify potential Support and Resistance levels and gauge the strength of the current Trend.

Bitcoin Speculator Contracts: Hedging Behavior?

Bitcoin speculator positions have shown a bearish bias for the past five weeks. This seemingly contradicts the recent rapid price increases and record highs. This bearish sentiment among speculators might reflect hedging strategies, a common practice in volatile markets. As Bitcoin’s price rises, speculators might increase their short positions to protect against potential price corrections, while a price drop could trigger an increase in long positions. This behavior highlights the complexities of Market Sentiment and the challenges of interpreting price action alone.

Exchange Rate Market: USD Weakness Continues

The US Dollar Index experienced a sharp decline this week, falling below the crucial 100 level to close around 99.30. Despite the decrease in speculator contracts, several major currencies – the Euro, Pound, Yen, Swiss Franc, Canadian Dollar, Australian Dollar, and New Zealand Dollar – recorded positive weekly gains against the US Dollar in the exchange rate markets. This divergence between speculator bets and actual Exchange Rates underscores the importance of considering multiple factors when assessing Forex Trading opportunities. The Mexican Peso and Brazilian Real also demonstrated positive performance last week, continuing their recent upward trends.

Strength Scores: Yen and Real Dominate

The COT Strength Scores, a normalized measure of speculator positions over a three-year range (0-100 scale), reveal the Japanese Yen (97%) and Brazilian Real (66%) as the strongest currencies this week. The Mexican Peso (61%), EuroFX (57%), and Swiss Franc (53%) follow closely. On the other end of the spectrum, the US Dollar Index (6%) and Bitcoin (9%) are in extreme bearish territory (below 20%), indicating significant negative sentiment. The Australian Dollar (34%) and New Zealand Dollar (37%) also show relatively weak strength scores. These scores provide a valuable additional layer of analysis, supplementing the raw contract numbers.

3-Year Strength Statistics

6-Week Strength Trends: NZD and CHF Lead

Analyzing the six-week trend in COT Strength Scores (measuring the change in scores over this period) reveals the New Zealand Dollar (18%) and Swiss Franc (13%) as the top performers. The Mexican Peso (12%), Canadian Dollar (7%), and EuroFX (6%) also show positive momentum. Conversely, Bitcoin (-72%) leads the decline, followed by the Brazilian Real (-15%), US Dollar Index (-7%), and Australian Dollar (3%). These trends offer a longer-term perspective, complementing the weekly analysis and providing context for potential long-term trading positions. This longer timeframe can help traders identify sustained trends and filter out short-term noise.

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