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Weekly Speculative Positions (as of May 16): Yen and Aussie Bears Push Forward, while Sterling Bears Continue to Run for Cover


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 May 16:

The net short CHF position has risen from 15.2 short to 21.1K contracts short (against USD).

But the major movement was that speculators are net long the euro now and not the dollar any more. This implies that they are also long Euro against CHF.

Speculative Positions

Choose Currency

source: Oanda

In the Commitment of Traders reporting week ending May 16, speculators in the futures market made three significant adjustments in the currency futures.

First, they continued to accumulate a large short yen position. The bears added 23k contracts to their gross short yen position to lift it to 102k contracts. This is the highest in two months and the largest build in five months. The net short yen position swelled to 60k contracts from 36.3k.

Second, speculators continued to cover short sterling exposure. It is the fourth week consecutive week gross short were reduced. They covered 10.3k contracts in the most recent reporting period, bringing the gross short position to a still substantial 81.4k contracts. Recall that as recently as the end of April the bears were short 146k contracts. In the past two reporting period, 54k short contracts were bought back, the largest two week move in six years. The net short position of 33k contracts is the smallest since the referendum last June.

Third, the bears increased their gross short Australian dollar position by 50% to 45.9k contracts (a 15.2k increase). It is the largest increase since last September and the gross short position is the largest in three months. The net long position fell to 6.3k contracts from 25.8k. Recall at the end of March, the net long speculative position stood a little above 53k contracts.

Adjustment in two other currencies was notable even if the size of the adjustment did not meet our threshold of 10k contracts. In the euro, speculators added 8.7k contracts to the long position, which stands at 164.4k contracts, and the bears covered 6.6k contracts, leaving a gross short position of 126.6k contracts. The net position remained long (37.6k s 22.4k) for the second consecutive week.

Speculators have been persistently building a short Canadian dollar position. They have added to the gross short position ever week since the end of February with one exception (mid-April). They added 3.5k contracts in the most recent period. It stands at 137.1k contracts, the largest among the currency futures. It has doubled over the past month.  The longs continued to cut and run. The gross long position was trimmed by 8.3k contracts to 39.1k. At the start of the month, was near 67k contracts.

Although sentiment has turned against the US dollar, speculators generally increased short exposure. There were two exceptions, the euro and sterling, which we have already discussed. Sterling, the euro, and Mexican peso were the only currencies in which the gross longs were grown.

Bulls and bears thought there was opportunity in the US 10-year  Treasury note futures. The bulls added 31.2k contracts (so the gross longs numbered 893k contracts),while the bears added 20.3k contracts to the gross short position (to 653k contracts). The net long position edged up to 240k contracts from 229.1k.

Speculators moved to the sidelines in the oil futures markets. The bulls trimmed the gross long position to 646k contracts (a 9.2k decline), while the bears pared the gross short position to 317.1k contracts (a 9.3k decline). The net long position was hardly changed at 328.9k contracts.

16-May Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro 37.6 22.4 164.4 8.7 126.6 -6.6
Yen -60.0 -36.3 42.0 -0.6 102.0 23.0
Sterling -33.0 -46.8 48.4 3.5 81.4 -10.3
Swiss Franc -21.2 -15.2 3.9 -4.5 25.1 1.4
C$ -98.0 -86.2 39.1 -8.3 137.1 3.5
A$ 6.3 25.8 52.2 -4.2 45.9 15.2
NZ$ -12.0 -10.8 11.9 -0.2 23.9 1.0
Mexican Peso 70.1 69.9 92.7 0.2 22.6 0.0
US Treasuries 240 250.9 893  31.2 653  20.3
Crude Oil 328.9 310.4 646  -9.2  317.1  9.3
(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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