COT: Commodity selling accelerated ahead of US midterms as euro and Aussie shorts hit extremes

Speculators sharply reduced exposure across currencies and commodities ahead of the US midterm elections, leaving several markets vulnerable to short covering and larger price swings.

• Aggregate US dollar longs fell 5% to USD 36.5 billion, while euro shorts reached a ten-year high of 158,000 contracts worth USD 22 billion and Australian dollar shorts hit a record 129,500 contracts worth USD 9 billion.
• Hedge funds sold all 25 major commodity futures tracked, cutting their combined net long by 393,000 contracts, or 33%, to 783,000 contracts as the Bloomberg Commodity Index fell 3.3% in the week before the vote.
• Crude oil net longs declined by 81,300 contracts to 268,400, a three-month low, while natural gas net shorts reached a six-year high of 216,600 contracts.
• Gold net longs fell to a five-month low of 104,000 contracts, silver net longs shrank to 2,700, and copper net longs dropped to a 14-month low of 34,400 from more than 82,000 in September.
• The combined grains and oilseeds net long fell 83% in six weeks to 166,000 contracts, while corn positioning reversed from a record 431,000-contract net long to a 23,000-contract net short after an 18% price decline since September.

Takeaway: Extreme positioning helped trigger a post-election rebound through short covering, but the author sees sustained gains requiring fundamental support, with light positioning leaving commodities sensitive to further technical and fundamental shifts.