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Weekly Speculative Positions (as of April 11): Adding To Foreign Currency Exposure Before Trump’s Talk


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 data as of April 11:

The net short CHF position has fallen to 10K contracts (against USD).


Speculative Positions

Choose Currency

source: Oanda

In the days before US President Trump expressed concern about the dollar’s exchange value, speculators in the futures market mostly added to the gross long foreign currency positions.  There were two exceptions, the Canadian and Australian dollars, which supports our suspicions of a change in sentiment toward the dollar-bloc currencies.

The bulls liquidated 13.5k long Australian dollar futures contracts bringing their holdings down to 76.7k contracts.  The bears covered 9.0k previously sold contracts, leaving 31.6k.  The net position fell for the second consecutive week.   The net short Canadian dollar position grew for the fourth consecutive week, and now at 32.3k contracts,it is the largest in a year.

Besides the gross long Australian dollar position, there were two other gross position adjustments in excess of the 10k contract threshold and they were both in the euro.  The gross long speculative position increased by 18.1k contracts and the gross shorts increased by 25.7k contracts to 173.6k contracts and 192.6k contracts respectively.  The net short position increased to 19.0k, the second weekly increase.

Even though the gross position adjustments in the yen were minor, it is worth reviewing.  It lends support to our hypothesis that the yen’s gains have been more a function of short-covering than safe haven buying.  In the most recent reporting period 9k short contracts were covered and 2k contracts were added to the gross long position.  The net short position was reduced by 11k contracts to 34.8.  The four-week decline brought the net short position to its smallest since early December.

Look at what has happened this year.  The gross speculative long position increased by 2.7k contracts.  The gross short position has fallen by 46k contracts since the end of last year and 28k since the middle of March.

Bulls and bears saw opportunity in the 10-year note futures, though in the two days after the reporting period ended, the yield fell 10 bp to new lows since last November.  The bulls added 68.6k to the gross long position that now stands at 682.3k contracts.  It  has grown by 210k contracts since the end of February.  The bears tried picking a top and added 77.4k contract to the gross short position, which stands at 746.8k contracts. This snapped a five-week short-covering phase that had seen the gross shorts fall from a record 882k contracts to 669k contracts.

While speculators added to gross long and short 10-year Treasury note futures, they reduced exposure to the light sweet crude oil futures.  The shorts capitulated and covered 32.7k contracts, reducing the gross short position to 208.9k contracts.  The longs were trimmed by 4k contracts to 646k  These gross adjustments led to a 28.7k-contract increase in the net long position to 437k.

11-Apr Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro -19.0 -11.4 173.6 18.1 192.6 25.7
Yen -34.8 -45.8 43.3 2.0 78.1 -9.0
Sterling -105.9 -99.7 31.9 1.1 137.8 7.4
Swiss Franc -10.1 -13.8 13.1 7.4 23.2 3.7
C$ -32.3 -30.2 31.4 -7.1 63.8 -5.0
A$ 45.2 49.6 76.7 -13.5 31.6 -9.0
NZ$ -15.2 -14.7 19.0 2.0 34.2 2.4
Mexican Peso -12.7 -9.7 86.8 5.8 99.5 8.8
US Treasuries -64.5 -210.5 682.3 -68.6 746.8 77.4
Crude Oil 437.1 473.8 646 4 208.9 -32.7
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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