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Weekly Speculative Positions (as of June 06): Speculators Trimmed Exposure Ahead of Super Thursday


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 June 06:

The net short CHF position has fallen from 18.5 short to 16.5K 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 CFTC reporting week that covered the US employment data and the run-up to Super Thursday that featured an ECB meeting, former FBI Director Comey’s testimony before the Senate Intelligence Committee, the UK election, speculators mostly reduced exposure in the foreign exchange futures market. We track 16 gross positions. Of these, all but three involved reducing exposures.

Speculators add to gross short sterling positions. It is the only short position of the eight currency future we follow that increased. It was minor adjustment, but the sign was notable. Speculators added 1.6k contracts to the gross short position, lifting it to 76.9k contracts. Incidentally, the bulls liquidated 5.4k gross long contracts, leaving 40.1kc contracts.

The gross long New Zealand dollar and Mexican peso futures were increased by speculators; 2.5k and 3.1k contracts respectively. The gross long Kiwi position stands at 19.3k contracts and the gross long peso position rose to 115.6k contracts.

Speculative positions were barely adjusted even if they were mostly in the same direction. Three quarters of the gross positions changed by 4k contracts or less. There were only two significant gross position adjustments (more than 10k contracts) and both were accounted for by the euro. The bulls trimmed 11.3k contracts leaving them long 164.9k contracts. The bears covered 12.5k contracts. A 90.9k gross short position remained.

Although the absolute adjustment was small, it was sufficient to turn the net speculative position in the Australian dollar futures net short for the first time in five months, and lift the net long peso position to its largest in three years. The speculators trimmed the gross long Aussie position by 4k contracts and covered a little less than a thousand previously sold contracts. This put the net speculative position short a hundred contracts. The net long position has fallen in every week here in Q2 after ending Q1 with a net long position of around 53k contracts.

Meanwhile, the peso bulls are very much in the driver’s seat. They added another 3.1k contracts to the gross long position, which stands at 115.6k contracts. The bears felt the heat and covered another 6.7k contracts, leaving a gross short position of 30.8k contracts. The net long position increased to 84.8k contracts and is the largest among the currency futures. Indeed with the turn in the Aussie, of the eight currency futures were track, speculators are only net long (net short dollars) against the peso and euro.

The reporting period ended on the day when US 10-year Treasury yields recorded the low for the year near 2.13%. The speculative positioning suggest the bulls were getting tired. They added only 1.4k contracts to their gross long position. It stands at 878.9k contracts (each one with a notional value of $100,000). The bears are picking a top in the note. They shorted another 47.5k contracts, giving a gross short position of 666.8k contracts. The net long position was reduced to 212.1k contracts form 258.2k. It is the second week it has fallen after peaking near 362k contracts.

The price of oil was a down draft. The recent peak was at $52 on May 25 for the July light sweet contract. It fell to about $46.75 by the end of the reporting period, and fell to $45.20 subsequently. Oil bulls were not discouraged, they bought into weakness. They took advantage of the retreat to accumulate another 29.3k contracts, giving them 624.9k contracts. The bears pushed the trend and added 20.6k contracts to their gross short position, now 242.4k contracts. The net long position rose by 8.7k contracts to 382.5k (each contract representing 1000 barrels).

6-Jun Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro 74.0 72.9 164.9 -11.3 90.9 -12.5
Yen -55.0 -52.3 39.7 -3.7 94.8 -0.9
Sterling -36.7 -29.7 40.1 -5.4 76.9 1.6
Swiss Franc -16.6 -18.5 6.8 -2.0 23.3 -3.9
C$ -94.5 -98.2 26.5 -2.8 121.0 -0.9
A$ -0.1 3.1 39.1 -4.0 39.2 -0.9
NZ$ -1.8 -5.5 19.3 2.5 21.1 -1.3
Mexican Peso 84.8 75.0 115.6 3.1 30.8 -6.7
US Treasuries  212.1 166  878.9 1.4  666.8  47.5
Crude Oil  382.5 391.2  624.9  29.3  242.4  20.6
(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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