The latest CFTC data from August 12, 2025, shows little change in FX positioning compared to the prior week. The Euro is still the largest net long position, ranking above the 80th percentile for the last year in terms of net positioning as a percentage of open interest. The British Pound is the second-largest net short. Rapid market shifts have occurred in the last two weeks, following a less dovish tone from the Bank of England and new jobs and retail sales data. This could create trading opportunities between the Euro and Pound, especially if the EU Flash PMIs underperform and UK PMIs exceed expectations.

Australian Dollar Opportunities

The Australian Dollar holds the largest net short position, but there are few opportunities to take advantage of this due to a lack of Australian economic data next week. As of August 12, 2025, the Euro stands out as the market’s biggest long position. This trade is crowded, sitting above the 80th percentile over the past year, which makes it susceptible to a sudden reversal. Much of this confidence stems from July’s inflation in the Eurozone, which was 3.1%, slightly higher than expected, reinforcing hopes for a hawkish European Central Bank. In contrast, the British Pound is the second-largest net short, with negative sentiment developing quickly in early August. This pessimism seems to overlook some strong data from last week, where July’s retail sales rose by 0.5%, and unemployment unexpectedly dropped to 3.8%. The Bank of England also sounded less dovish than expected at its last meeting, creating the possibility of a squeeze on short positions.

Trading Strategies Based on Divergence

This situation sets up a clear divergence play between the Euro and the Pound for the coming weeks. The most effective strategy is to monitor the upcoming EU and UK Flash PMI releases for a potential catalyst. If Eurozone data falls short of expectations while UK figures remain strong, the crowded EUR long and GBP short positions may unwind quickly. For derivative traders, this suggests positioning for a rise in GBP against EUR, possibly through EUR/GBP call options. This would allow for profits if the Pound appreciates against the Euro while clearly defining the risk involved. The key factor will be the divergence in the upcoming economic data. Meanwhile, the Australian Dollar remains the largest net short position, mainly due to ongoing concerns about weak economic data from China. However, with little significant Australian data scheduled for this week, there isn’t a clear trigger to act on this crowded trade. It may be wise to wait for a stronger signal before considering a move. Create your live VT Markets account and start trading now.

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