Speculators Dump the USD

Speculators made the biggest reduction in their net USD position since the week of September 24th 2013. Specs are still net long the USD, but the position has been reduced from 163.9K to 69.3K. Since this is an aggregate net position, we much examine the components that contribute to this number.

The largest speculative net position has been in the Japanese yen. It remains the largest speculative short at 85.8K, but it is down from 132K in the previous report. Despite specs holding the largest net position in the yen, the total OI in the yen has been liquidated to where it is now smaller than the euro, pound or even the Canadian Dollar.

The long sideways movement in the yen versus the USD has taken its toll on the yen bears. It would seem those remaining have conviction and are not anxious to dump their short positions.

There was also a big shift in the Australian Dollar trade. For months the specs, mostly the large ones, have been short the Australian Dollar. Like many positions that get too big, things did not work out well for the specs. The trade back to and above the 90 handle has chased the old bears out of this currency. The current OI is quite small, less than half of that in the Canadian Dollar. It will not take much trade to again set this currency in motion. Which way will it be?

• US Dollar Index: Large specs added to their short USD position while the small specs remain long the DI. The total spec position is now short the DI by 7K contracts. The aggressive selling by the large spec was a poor move.

• Euro (EUR/USD): Both size spec groups were short the USD and long the euro for the cut off of this report. The total euro spec long grew to 33.5K, not a good move in front of the Fed report which the euro down. There was liquidation of the OI in front of the March contract expiration, but the OI remains large, over 303K.

• British Pound Sterling (GBP/USD): Aside from OI liquidation, there was little movement in the pound. Both spec groups remain long the pound by over 40K contracts. These positions were losers after the cut off for this report. The OI at 225K remains quite large.

• Japanese Yen (JPY/USD): The short yen specs reduced their position from 132K to 85.8K This represents a huge liquidation of positions in only a week. Large specs are still a 3.7 ratio short but is down from a 7.3 ratio last week. This probably was a big reason for the rally in the yen versus the USD taking the pair to under 101.50.

• Swiss Franc (CHF/USD): Specs continued to add to their long SF position taking the total long up to 22.8K, the largest in many weeks. Both size specs are about a 2 ratio long. Longs were probably part of the reason for the late week loss to the USD, as they got out of positions.

• Canadian Dollar (CAD/USD): Only the C$ contract showed an increase in the OI which is usually the situation on contract expiration day. This report shows the C$ short up to 76K from 53.6 last week. After expiration at the close on Wednesday the 19, the OI was down over 53K contracts. The large spec is almost a 3 ratio short.

• New Zealand Dollar (NZD/USD): Specs continued to extend their long position in the NZ$. There total long is up to 18.5K in this very small market. The small spec is a 2.0 ratio long and the large spec is a 2.7 ratio long.

• Australian Dollar (AUD/USD): The short liquidation in the A$ gained momentum and the total spec short in the Aussie is down to 30K contracts, from53.9K last week. The total open contract number in the A$ is now quite small, down to Futures only is the smallest OI in months. The small OI was probably a reason why the A$ had an easy job rallying.

Currency Commitments of Traders with Delta-adjusted Options and Futures Combined, data through March 18, 2014