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Weekly Speculative Positions (as of June 13): Specs Cut Euro, Yen, and Aussie Exposure and Do Little Else

 

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 13:

The net short CHF position has fallen from 16.5 short to 14.5K 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.

We wonder how long this will be the case, given that we expect Euro zone inflation to fall under 1% from December 2017 onward.

Speculative Positions

Choose Currency

source: Oanda

The low volatility in the foreign exchange market may be discouraging speculators in a self-reinforcing cycle. Nearly half the gross positions we track had adjustment of less than 4k contracts.

The short-covering of the yen was the largest speculative adjustment in the CFTC reporting week ending June 13. The yen bears bought back 10.1k contracts, leaving them short 84.7k. The dollar made a low the day after the reporting period ended and then rally about 2.5% against the yen.

The bulls liquidated 5.6k contracts, leaving a gross long yen position of 34.2k contracts. The net short position fell to 50.6k from 55.0 contracts.

Speculators also reduced exposure to the euro. A little less than 1000 long contracts were liquidated and 5.7k short contracts were covered. This leaves a gross long position of 164.2k contracts, the largest among the currency futures, and 85.2k gross short contracts, also the largest.   The net position increased to 79.1k contracts. It was the ninth consecutive week that the net position grew; first becoming less short and then increasingly long. Of note the net long position increased even though the bulls did not increase the gross long position.

Speculator moved to the sideline in the Australian dollar as well. The longs were trimmed by 6k contracts to 33.1k, while 4.6k previously sold contracts were bought back, leaving 34.6k contracts still short. The net position stayed short for the second consecutive week (-1.5k vs. -0.1k).

Bulls and bears saw opportunity in sterling  and the New Zealand dollar. The gross long sterling positions edged 0.4k contracts higher to 40.6k. The gross short position increased by 3.1k contracts to 80.0k. For the third consecutive week the net short speculative sterling position increased.

It does not happen often, but gross long New Zealand dollar position tied with the Mexican peso for the largest increase during the reporting period. The  long Kiwi position increased by 7.9k contracts to 27.3k. The gross short position rose by 4.5k contracts to 25.7k. This meant that the net position swung from short 1.8k contract to long 1.6k for  the first time since March.

Bulls  and bears moved to the sideline in the 10-year Treasury note futures. The bulls liquidated 48k contracts. They still have a gross long position of almost 831k contracts. The bears covered nearly 110k contracts, which took the gross short position down just below 557k contracts. As a result the net long position increased to 274k contracts from 212.1k.

Bulls and bears saw opportunity in the light sweet crude oil futures. The gross long position grew by 14.5k contracts to 639.3k. The gross short position was lifted by nearly 38k contracts to 280.3k The net long position was trimmed by 23.5k contracts to 359k.

13-Jun Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro 79.1 74.0 164.2 -0.7 85.2 -5.7
Yen -60.0 -55.0 34.2 -5.6 84.7 -10.1
Sterling -39.4 -36.7 40.6 0.4 80.0 3.1
Swiss Franc -14.5 -16.6 8.5 1.8 23.0 -0.3
C$ -88.6 -94.5 26.8 0.3 115.4 -5.6
A$ -1.5 -0.1 33.1 -6.0 34.6 -4.6
NZ$ -1.6 -1.8 27.3 7.9 25.7 4.5
Mexican Peso 95.8 84.8 123.5 7.9 27.7 -3.1
US Treasuries 272.3 135.3 830.1 -48 556.8 -110
Crude Oil 359 335.5 639.3 14.5 280.3 38
(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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