Too early to position for USD strength

Non-commercials increased their bets in favor of the GBP, EUR, and AUD against the US dollar which continued to move out of favor among speculative traders, which warns of further potential upside in those currencies.

The GBP net long is bullish and building, now at 50.5k contracts surpasses the readings of December 2012 (+36.3k contracts) and almost those of Feb 2011 (+51.1k contracts). The ratio between longs and shorts among the non-commercials was 2.04 (in December 2012) 3.94 (in Feb 2011) and is now at 2.37 en route to hit extreme levels. Showing 91.6k contracts in the 8th May report, the gross long contracts -most recent at 87.4k- are at record levels compared to the legacy 2011/12 peaks.

The net long EUR position rose to +27.7k, the second largest net long exposure after the GBP in the week through April 15th. Where the EUR beats the British currency is with its gross long position of 106.3k contracts. The rate of change in the specs increase of bullish contracts outpaced the increase in bearish contracts, but the gross shorts are still substantial at 78.6k contacts holding the net positioning well below its March highs of +53k contracts.

The buying of AUD since late January improved for another week, making it the second consecutive week that the net Australian dollar position has been long (+8,097 contracts). This is the result of an increase in the gross longs (40.4k) coupled with a trimmed gross short position (32.3k). But participation is still at low levels (OI of 98.9k compared to the aprox 200k from a year ago) suggesting the possibility for the AUD to flip back to the short side in the near future.

Short covering is also seen in the gross short JPY positions which were reduced to 83k (from 100.8k) almost achieving the lowest gross short yen position from last October (79.8k) and basically halving the net short position of December (-143.8k to -68.7k). The yen still reports the largest net short position among majors, but its negative bias is declining significantly on risk averse sentiment.
Last week, non-commercials brought the yen’s overall net bearish positions to the lowest level in approximately a month, challenging to reach a new liquidation level. A key number to follow in the next COT readings will be the gross long contracts which made some modest attempts to rise in the last 6 weeks.

Speculators are also net short the CAD futures increasing the position to -35.4k contracts, the result of a slight reduction of gross longs (500 contracts) and an increase in gross shorts (700 contracts).
For the NZD there was little change in the net spec position in the last reporting week, remaining the bias bullish but with abated momentum accordingly to FXstreet`s COT oscillator.


About Commitments of Traders
The weekly Commitment of Traders report summarizes the total trader positions for open contracts in the futures trading markets. The CFTC categorizes trader positions according to commercial hedgers, non-commercials (also called speculators) and nonreportable traders (usually small traders/speculators). The report is published every Friday and shows futures positions data that was reported as of the previous Tuesday.