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Weekly Speculative Position: Net Short Euro and Yen Are Falling. Short CHF Stable

 

Swiss Franc

Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.

The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The carry trade against CHF collapsed.

The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011.

In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed.

CHF Speculative Positions

This week’s data:

Speculators are net short CHF with 13.6K contracts against USD.

This is nearly unchanged.

Speculative Positions

Choose Currency

 

source: Oanda

Speculative activity picked up in the latest CFTC reporting period ending January 24. There were three gross position adjustments of more than 10k contracts.

Speculators covered 11.1k previously sold euro futures to reduce the gross short position to 184.3k contracts. Though it still is large, it reflects a 30% reduction from the peak in late October.  Since then the gross long position has been essential flat.  The fact the euro’s gains in the spot market reflects short-covering from the trend follower and momentum traders reinforces our sense that what is taking place is a correction not a reversal of trend.

The bears also covered 12.4k yen futures contracts, taking the gross short position to 94k contracts. A month ago it stood at 140k contracts.  Here too there is not much new buying taking place.  The gross long position slipped by 1.4k contracts, leaving 27.1k.

The bulls showed their hand in the Australian dollar. They added 12.2k contracts to their gross long position, which now stands at 54.6k contracts.  Some speculators tried picking a top and added 6.7k contracts to the gross short position, lifting it to 44.3k contracts.  The net speculative position was long for the second consecutive week.

Although the gross position adjustments were modest, they were sufficient to swing the net speculative position to long Canadian dollars for the first time since last September. The bulls added 4.1k contracts to their gross long position.  It is at 36.2k contracts.  The shorts covered 3.9k contracts, leaving a gross short position of 33.7k contracts.  The resulting net long position is 2.5k contracts.

Speculators tried to pick a bottom in the Mexican peso even as the tensions between the US and Mexico escalated.The gross long position increased by 9.6k contracts, the largest gross long rise after the Australian dollar, to 32.1k contracts.  The gross position increased by less than 1k contracts.

The record gross short speculative position in the US 10-year Treasury note futures was extended by another 8.8k contracts to 855.5k. However, bottom pickers jumped it took 87.4k contracts to add to the gross long position, lifting it to 558.3k contracts.   This resulted in the net position falling from 375.7k contracts to 297.2k.

The bulls continue to charge ahead in the light sweet crude oil futures market. They added 10.9k contracts to the gross long position, which now stands at 6424k contracts. The bears covered another 7k contracts to trim the gross short position to 160k contacts. The net position rose by 17.8k contracts to 482.5k.

 

24-Jan Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro -52.3 -66.5 131.9 3.1 184.3 -11.1
Yen -66.8 -77.8 27.1 -1.4 94.0 -12.4
Sterling -63.2 -66.2 51.5 -3.7 114.7 -6.8
Swiss Franc -13.6 -13.7 6.2 -1.0 19.8 -1.0
C$ 2.5 -5.5 36.2 4.1 33.7 -3.9
A$ 10.3 4.8 54.6 12.2 44.3 6.7
NZ$ -9.9 -12.3 25.9 0.3 35.7 -2.1
Mexican Peso -64.7 -73.3 32.1 9.6 96.8 6.9
US Treasuries -297.2 -218.6 558.3 87.4 855.5 8.8
Crude Oil 482.5 464.5 642.4 -10.9 160.0 7.0
(CFTC,
Bloomberg) Speculative positions in 000’s of contracts
Full story here
George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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