The markets have been noisy lately central banks, inflation, geopolitics, tariffs you name it, traders are reacting to it. Sometimes in this kind of chaos, the best thing to do is strip it all back and look at the Commitment of Traders (COT) report for clarity.
And right now, two markets stand out with extreme positioning that could turn into potential trading opportunities: Crude Oil and AUD/USD.
1. Crude Oil – Shorts at a 13-Year Extreme
Non-commercial traders are holding record short positions in crude oil futures, levels we haven’t seen since 2012. That’s a big statement from hedge funds. The logic is simple: OPEC+ keeps increasing production, and more supply usually weighs on prices.
Technically, here’s what I’m watching:
Crude recently rejected support at 61.66, but the daily chart is still locked in a downtrend.
A trendline resistance has formed from the June 23rd high through July 30th.
If price breaks above that trendline, we could see the first signs of a bullish breakout.
Alternatively, if it slides back down to test the lows again, watch closely for a false breakout reversal setup.
2. AUD/USD – Heavy Shorts, Key Support Holding
I’ve been talking about this one for a while, and it’s still high on my watchlist. The COT report shows extreme short positioning in AUD futures, far greater than what we saw in August, and not far from April 2024’s reversal levels.
Add to that:
AUD/USD buyers continue to defend 0.6400, a key support zone.
USD weakness is starting to creep in, and if China data improves even slightly, AUD could get a serious tailwind.
If 0.6400 holds, it tells us sellers might be running out of steam and buyers are ready to push higher.
Thoughts
The COT report is flashing some big signals right now:
Oil shorts are at 13-year extremes.
AUD/USD shorts are stretched to levels that historically trigger reversals.
For us traders, this is about patience and timing. Extremes don’t mean immediate reversals, but they do mean opportunity. If the technicals line up the setup could be too good to ignore.