Previous post Next post

Weekly Speculative Positions (as of July 04): Speculators Still Dollar Negative


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 July 04:

The net short CHF position has fallen from 4.7K short to 0.1K contracts short (against USD).

Speculators are long EUR against both USD and 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

Speculators in the futures market made several significant position adjustments in the CFTC reporting week ending July 4, despite it being a holiday-shortened week. The gross adjustments were mostly to reduce long dollar exposure and increase short dollar exposure. This accounted for a full three-quarters of the speculative position adjustments.

There were four significant position adjustments, which we define as a change of 10k contracts or more in the gross speculative exposure. Three of these were changes in the gross short positions.

The bears covered 12.5k previously sold euro contracts, reducing the gross short position to 108.5k contracts. The bulls added but 6.3k contracts so the gross long position stands at 185.9k contracts. The net long position jumped to 77.5k contracts from 58.7k, and this is a new six-year high.

The bears also covered 10.5k Mexican peso contracts, leaving 34.5k contracts. The bulls liquidated 6.6k contracts, leaving 119.4k contracts.  The net long positioned edged higher to 84.9k contracts from 81.0k.

The yen in an exception. The gross short position increased by 19.1k contracts to stand at 118.7k contracts. The gross long position increased by 5.4k contracts to 43.6k. The net long position rose to 75.0k contracts from 61.4k. It has risen by 26k contacts or nearly 50% in the past two reporting periods.

The bulls tried making a stand in sterling. They added 10.3k contracts to lift the gross long position to 54.0k in a period that sterling had extended a five-day rally into eight sessions. In the three sessions since the reporting period ending sterling has slipped by 0.3% as weak data undermined the rate hike argument.

In other developments, we noted that the net short Swiss franc position is about a hundred contracts, the smallest of the year. The next short Canadian dollar position fell by 10k contracts. It is the sixth consecutive week it has fallen but remains the only dollar-bloc currency that speculators have a net short position. The net long Australian dollar position is the largest since early May, while the 29.1k net long New Zealand dollar position is the largest since 2013.

The bulls retreated in the face of the sell-off in the US Treasury market. Almost 10.5k contracts were liquidated so that the gross long speculative position in the 10-year Treasury note futures stands at 825k contracts. The bears were emboldened and added 28.7k contracts to the gross short position (to 562.0k contracts). These gross adjustments produced a fall in the net long position to 263k contracts from a little more the 302k.

Speculators reduced exposure to the oil futures market. The gross longs were cut by 5.1k contracts (to 633.8k), while the gross shorts were reduced by nearly 19k contracts (to 292.8k).  This led to a 13.9k increase in the net long position to 341.0k contracts.

4-Jul Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro 77.5 58.7 185.9 6.3 108.5 -12.5
Yen -75.0 -61.4 43.6 5.4 118.7 19.1
Sterling -27.8 -39.1 54.0 10.3 81.8 -1.0
Swiss Franc -0.1 -4.7 10.9 -0.3 11.0 -4.8
C$ -39.4 -49.5 34.3 5.6 73.7 -4.5
A$ 32.4 19.7 57.5 8.6 25.1 -4.0
NZ$ 29.1 25.2 44.5 -0.5 15.4 -4.4
Mexican Peso 84.9 81.0 119.4 -6.6 34.5 -10.5
US Treasuries 494.2 455 825 -10.5 330.8 28.7
Crude Oil 341 365 633.8 5.1 292.8 -18.9
(CFTC, Bloomberg) Speculative positions in 000’s of contracts

Full story here Are you the author?

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.
Previous post See more for 4) FX Trends Next post
Tags: ,,

Permanent link to this article:

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.