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Weekly Speculative Position: More EUR Shorts, Less CHF Shorts .. Again


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

Last week’s data:
Once again:

Speculators increased their EUR net short position against the dollar, but lowered their CHF net shorts (vs. USD). This tendency confirms our view that EUR/CHF will move towards parity – if the SNB does not object, and she will not, see more under SNB interventions update.


Speculative Positions

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source: Oanda

Speculators in the futures market mostly added to exposure in the CFTC reporting week ending February 21.  Of the eight currency futures we track, the bulls added to gross long positions in six.  Only in sterling and New Zealand dollar futures did the speculators liquidate gross long positions.  The bears added to gross short positions in six of the eight currencies.  The Swiss franc and New Zealand dollar were the exceptions.

Most position adjustments remain small. There were only two changes that near or above our 10k contract threshold for significant shifts.  The bears jumped on the euro and added 17.1k contracts to the gross short position, lifting it to 189.2k contracts.   The only other gross adjustment more than 6k contracts was the Australian dollar futures, where the bulls added 9.5k contracts to the gross long position, which now stands at 88.8k contracts.

Other position adjustments were minor, but the general bullishness of speculators toward the dollar-bloc currencies remains evident.  The net long positions expanded even in the New Zealand dollar futures even though the gross longs and shorts were reduced.  The net short euro and sterling futures positions grew, while the net short yen and Swiss franc positions slipped.  The net short Swiss franc position of 8.9k contracts is the smallest so far this year.

The net short Mexican peso position in speculators hands was reduced to 56.5k contracts from 60.2k.  It was not a large adjustment, but sufficient to be the smallest since mid-December. Note, though, that speculators added 1.1k contracts to the gross short position, which is the third largest behind the euro (-189.2k) and sterling (-104.6k).  Speculators added almost 5k contracts to the gross long position, which at 35.1k contracts is the third smallest behind the Swiss franc (6.9k) and the yen (30k).

The continued strength of US Treasuries has begun forcing the record short position to be reduced. The bears covered 36.7k previously sold 10-year Treasury futures contracts, leaving a gross short position of 830.6k, still substantial by nearly any measures.  The bulls added 2.5k contracts to the gross long position.  It now stands at 528.3k contracts.  The gross position adjustments translate into a fall in the gross short position to 302.3k contracts from 341.5k.

The bulls still dominate the crude futures markets. The bulls added another 29.5k contract to the gross long position, which now stands at 712.7k contracts.  It has increased by a little more than 100k contracts since the end of 2016.  The bears covered 18.7k previously sold contracts to leave a gross short position of 156.1k contracts.  That is the smallest gross short position in nearly seven years.   These gross adjustments mean that the net long position rose by 48.2 contracts to 556.6k.

21-Feb Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro -58.3 -46.8 131.0 5.6 189.2 17.1
Yen -50.2 -51.3 30.0 2.3 80.1 1.1
Sterling -66.4 -65.5 28.3 -0.8 104.6 0.0
Swiss Franc -8.9 -11.5 6.9 0.3 15.9 -2.2
C$ 24.6 19.3 58.8 5.6 34.2 0.4
A$ 33.5 24.2 88.8 9.5 55.2 0.2
NZ$ 3.2 2.9 35.3 -1.3 32.1 -1.6
Mexican Peso -56.5 -60.2 35.1 4.9 91.6 1.1
US Treasuries -302.3 -267.5 528.3 -2.5 830.6 -36.7
Crude Oil 556.6 545.9 712.7 -29.5 156.1 -18.7
(CFTC, Bloomberg) Speculative positions in 000’s of contracts
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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on 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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