CFTC Weekly Positions Report: Same old story

Summary

Latest CFTC positions data, published on Friday, shows a continuation of the recent trend of positioning across the different asset classes. The leveraged community continues to offload "safe haven" trades and put on more risk, while the recent themes in EUR, GBP, and Crude Oil seem to persist. Unless the upcoming FOMC/BOJ meetings this week are going to provide a catalyst for a change in sentiment, this trend is likely to continue throughout the summer.

 

FX

Last week change in positioning continues to show two main themes:

1. The leveraged community continues to shift from "safe-haven" currencies (CHF, JPY) into "risk-on" currencies (AUD, NZD and CAD).

2. The leveraged community continues to underweight EUR and GBP against the USD (net short positions in both currencies continue to grow. Net short speculative GBP positions are reaching 5-years low.

JPY long speculative positions continue to decline (for a 2nd consecutive week). The upcoming BOJ meeting (due on Friday, Jul 29th) is likely to dictate the direction going forward, as the market expectations regarding an increase of the stimulus program grew significantly over the recent few weeks, alongside the view that the outlook for the US brightens and the FOMC is likely to increase interest rate sooner rather than later.\

Commodities Currencies (AUD, NZD, and CAD) continued to move slightly more positive in positioning term. That theme occurs despite declining oil prices, which should weigh on the CAD, and increasing chances that the RBNZ will cut rate on its Aug 10th meeting, which should weigh on the NZD)

MXN positioning reversed some of the recent recovery. MXN short positions were grew slightly.

 

Commodities

Last week change in positioning continued to show mixed change in positioning. Gold and Oil long positions were reduced, while Silver positioning continued to incline.

Gold long speculative positions were reduced by about 191,000 contracts, while Silver positions gained about 134,000 contracts. That change is also reflected by the ETF holdings of gold/silver (tracked by Bloomberg, under "ETFGTOTL Index" and "ETSITOTL Index").

Oil positions were reduced by about 17,000 contracts.

 

Rates

Last week change in positioning shows a clear picture about the speculative positioning in US Treasury Bond. The leveraged accounts reduced their long UST positioning significantly (which goes in line with the rally in US Treasury yields). This change in positioning is mostly due to the better outlook of the US economy and the FOMC likelihood to increase its interest rate by year-end (interest rate hike probably continues to move higher, and now is pricing in about 45% chance of a hike by year-end).

 

Equities

Leveraged positions in US equity market continue to show strong buying interest of equities, and reduction of protections (VIX positions).

S&P500 positions gained about 157,300 contracts, as S&P500 trading near all-time high.

NASDAQ positions gained about 57,300 contracts, reaching 1-year high.

VIX positioning was trimmed down as investors turned less fearful of market's downturn. The weekly decline in VIX leveraged positions stood at 16,100 contracts.

 

FX Scoreboard

Our G10 FX Scoreboard continues to show that USD is the strongest among G10 currencies, followed by AUD and CHF. JPY recovered some of the losses it suffered in the previous week, GBP seems to be stabling as the Brexit fallout is likely to be priced in.

Few interesting divergences to point out:

1. Australia/New Zealand – The AUD is ranked 2nd overall, while the NZD is ranked 9th. This emphasizes both the divergence between the outlooks, and the stretched positioning in AUDNZD. AUDNZD has moved about 4.5% since Jul 8th, and now consolidating around 1.07, which seems to be a technical resistance level. Moreover, the economic outlook for the two countries seems to be going the opposite direction (while the Australian economic data exceeding market expectations, the New Zealand data seems to disappoint)

2. Canada/Norway – As pointed out lately, there seems to be a growing divergence between the two oil-correlated currencies. Currently the NOK seems to be lagging with its reaction to the move in oil prices.

3. EUR/CHF – despite the market positive sentiment, EUR is weaker than CHF. This is quite unusual scenario, as EUR/CHF usually goes with the risk sentiment (i.e., risk-on = EURCHF higher).