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Weekly Speculative Positions (as of June 27): Speculators Scramble to Cover Short Canadian Dollar and Mexican Peso Futures


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 27:

The net short CHF position has risen from 3k short to 4.7k 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

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source: Oanda

Speculators bought back previously sold Canadian dollar and Mexican peso futures positions in dramatic fashion in the CFTC reporting week ending June 27.

Yet, in some ways, what is striking may not be the covering of 33.2k Canadian dollar future contracts, as large as that may be, but rather than there the speculative gross short position stood at a still substantial 78.2k contracts. The Canadian dollar appreciate nearly another 1,8% in the three sessions since the reporting period ended.

This suggests there is scope for more short-covering gains. In this vein, it is also interesting to note that the speculative longs barely changed. Given the dramatic move in spot, speculators were ill-prepared

Speculators covered around 40% of its gross short Mexican peso position, buying back 31.7k contracts. The gross short position stands at 45k contracts. Like in the Canadian dollar, speculators hardly added to their gross long position. They added less than 500 contracts, but their gross long position of 126k contracts is nearly five times larger than the gross long Canadian dollar position (28.7k contracts). Speculators are net long 81k peso futures contracts, but still net short 49.5k Canadian dollar futures contracts.

Speculators also added 12.4k contracts to the gross long euro position, raising it to 179.7k contracts. The shorts barely covered. The 1.4k contracts reduction in the gross short position, leaves a substantial 121k contracts. The net long position of 58.7k contracts compares with 64.8k at the end of May.

The other significant speculative position adjustment, which we define as 10k of more contracts, was with the Japanese yen. The bears added 10.1k to the gross short position, which stood at 99.6k contracts at the end of the reporting period. The bulls liquidated 1.2k contracts to trim the gross long position to 38.3k contracts. The net short position increased to 61.4k contracts from 50k previously. At the end May, the gross short position was near 52k contracts.

Speculators moved to the sidelines in the 10-year Treasury note futures market. The bulls liquidated 63.6k contracts, leaving a gross long position of 835.4k contracts. The bears covered 20.5k contracts.  The gross short position stood at 302.1k contracts, down almost 43k contracts.

The opposite was the case in the light sweet crude oil futures. The bulls tried picking a bottom and added 10.3k contracts which lifted the gross long position to 638.9k contracts. The bears pressed their luck and added nearly 12k contracts to the gross short position. It stands at 311.7k contracts. The net result of these gross position adjustments was to shave 7.4k contracts off the net long position to 581k contracts.

27-Jun Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro 58.7 44.9 179.7 12.4 121.0 -1.4
Yen -61.4 -50.0 38.3 -1.2 99.6 10.1
Sterling -39.1 -37.6 43.7 -6.9 82.8 -5.4
Swiss Franc -4.7 -3.0 11.2 0.0 15.9 1.6
C$ -49.5 -82.9 28.7 0.2 78.2 -33.2
A$ 19.7 15.0 48.9 6.6 29.2 1.9
NZ$ 25.2 21.5 45.0 6.6 19.8 2.8
Mexican Peso 81.0 49.0 126.0 0.4 45.0 -31.7
US Treasuries 533.3 449.2 835.4 -63.6 302.1 20.5
Crude Oil 327.2 305 638.9 -10.3 311.7 11.9
(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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