Specs Sell the Yen and the Euro Versus the USD

It sounds like a broken record as the specs continue to extend their short position in the yen and the euro. The total euro spec short positions, which includes both the large and the small shorts and the delta adjusted positions in options, is up to 198K in the euro, and 154K in the yen. The total positions of all the currencies we cover is 419.3K of longs and 89.3K of shorts. This is the largest net long in the USD since the report of August 6th 2013. The recent record total USD long was in May of 2013 when it topped 540K.

The biggest short position in the USD is against a long in the A$. Large specs continue to but the Aussie and their long is now up to 43.2K. Aside from the interest rate advantage in the A$, market action in the A$ versus the USD has been neutral. The total commodity currency long is now up to 60.5K, despite liquidation by the specs of their long Canadian Dollars.

Expiration of the September contracts means there will be big changes in the OI numbers as the commercials and specs decide which positions they want to carry forward. Currency trends usually do not end when a contract expires, so we can look forward to some volatile markets.

– US Dollar Index: The OI continues to grow in the DI and is now up to almost 92K, a recent record. Small specs made small additions to their long positions and are now a 6.3 ratio long. The large specs remain the big players in this market. The total spec long is up to 37K.

– Euro (EUR/USD): Like the DI, the OI in the euro continues to climb, and it is now almost 500K. Large specs were the buyers, adding to their shorts and are now a 3.7 ratio long. Small specs are a 1.9 ratio long but made reductions in their position. The total spec short in the euro is not 198K, and the spreading option category is 10.3% of the total open. This might imply some of the specs are hedging their positions with options.

– British Pound Sterling (GBP/USD): The spec crowd is tilted toward the long side of the pound, and made a modest addition to 28.9K in the latest period. After a seven week sell off in the pound, the market now seems to favor the bulls. The OI is large, 276K, as we head to expiration in the September contracts.

– Japanese Yen (JPY/USD): The yen remains weak and the total short spec position keeps growing. This always begs the question is the market weak because of the big spec selling, or is it bearish fundamentals that is attracting the selling. The total spec short position climbed to 154.5K from 130.6K last week. Large specs are a 6.4K ratio short.

– Swiss Franc (CHF/USD): Specs remain short the SF, in line with their positioning in the euro. The small specs are a 2.7 ratio short and the large specs a 3.2 to 1 short. The total short did come down to 29.8K from 31.5K last week.

– Canadian Dollar (CAD/USD): C$ specs seem undecided on the next move. The small specs are short a minor amount and the large specs are long. The total spec position is a long of 4.7K contracts. Total OI in the C$ is small, only 127K contracts which probably reflects the specs indecision.

– New Zealand Dollar (NZD/USD): Trade in the kiwi remains lackluster. The OI is small, only 24K, and most of the futures trade is dominated by the large specs. They are long by a 3.5 ratio. Despite recent weakness in the NZ$ they continue to hold these positions.

– Australian Dollar (AUD/USD): Large specs remain committed to the long side of the Aussie and added to their position during the period. They are now a 2.3 ratio long. The total long position increased to 43.2K from 37.5K last week. There has been a slight increase in the total OI as the specs buy positions. Total OI is approaching that in the C$.

Currency Commitments of Traders with Delta-adjusted Options and Futures Combined, data through August 26, 2014