FX markets are made up of many different players. One of the most influential are traders and speculators but because of the OTC nature of FX markets it is difficult to get a good read on exactly what the "speculators" are doing in the market.
But we can do that by proxy using the CFTC's Commitment of Traders report that they release at 3.30 pm each Friday afternoon.
Certainly Futures traders are but a tiny part of the almost 5 trillion dollars of FX turnover each day but they remain a very good bellwether for what positioning might look like in some currency pairs. In some pairs like the EURUSD watching the large speculators is a very good proxy for the underlying EUR rate - while in others the relationship is less strong.
What we know though is that watching this sector of the market is an important part of any traders toolkit of indicators for assessing the direction of a pair both short and long term.
Here is our summary of this week's moves in the positioning of the large speculators as reported by the CFTC in its Commitment of traders report.
Traders got hot on the AUD over the past week or so as you can see in the chart below as the large speculators increased by 7829 to 68146. We are now clearly in the top quartile of positioning over the past 6 months which flashes a warning for the Aussie Dollar at least for the speculative trade side of things but fundamental buyers appear to remain the bid whenever the AUD drops back as we saw late last week .
Equally as you can see in the chart below which I used for the Webinar at FXStreet last week the orange line represents the step up in concerns about Greece and the period when the traditional drivers stopped working as effectively as they used to - the COT report is no different but it remains important.
More big short Euro positions were instituted by the large speculators in the week to last Tuesday with a net increase in shorts of 16505 to -83646. As we have been saying for a few weeks now there is still plenty of negative fire power in the Euro short positions as the specs wind back their recent bullishness.
Certainly the market has been net short for a very long time now but the net position as it stands now is only in the botom quartile of positioning in the past 6 months.
So as the Euro slides and as the price action confirms the rejection of recent highs and pushes lower so it is that there is still plenty of room for shorts and we'd expect to see this short position increase with next weeks numbers.
Even though the USDJPY broke out shorts in the Yen were pared in the week till Tuesday by 9657 from the 6 month high of the week before. To put this in context though some big numbers have rolled off over the past few weeks from when the last time the Yen was this week in April.
So with the reduction the previous week there is once again room for more shorts as the USDJPY rallies but any positioning above -60,000 contracts would take short positions to multi year highs and flag a warning.
Longs were pared by 11051 in the Pound and with them the price of GBPUSD fell. This now puts positioning back in the middle range for the past 6 months but suggests that there is plenty of firepower should the GBP sell off continue for Speculative traders to sell more GBP.
Not a big contract but NZDUSD seems to have a reasonable correlation with the positioning of the spec community which currently sits in the top quartile of NZD longs. Positioning is still a little stretched and further upside limited.
CAD longs were pared again over the past week as the USD did a little better with a drop of 8643 to 66119. In terms of the last 6 months positioning this is now back in the middle of the range suggesting less long liquidation pressure in the short term.
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