Currency Specs Continue to Buy the USD

For the fifth consecutive week currency specs bought the USD. The total USD futures and delta adjusted options is now up to 539,440 contracts. The size of this long was exceeded only once in the past two years.

The biggest currency short/USD long, remains in the euro. That total is now up to 206,701 contracts from 199,901 last week. The DI contract is heavily weighted by the euro and this represents another 58.2K contracts. Also the SF is pegged to the euro and the SF short went up to 35.5 versus the USD from 30.5 in the prior week. Since the double bottom low of around 1.25, there has been a rally in the EUR versus the USD close to the 1.29 handle. The euro is now retreating from that bounce and might be heading for a retest of the low. There seems to be little short covering on the rally.

Selling in the so called commodity currencies continued heavy during the period. The total short in the three commodity currencies has jumped up to 82.3K, flipping from a long position only four weeks ago. They were most active selling the C$ in the most recent week. Their biggest short is in the A$, 48.4K contracts. Recent market action in the A$ has hurt the specs, but they continue to sell the Aussie.

– US Dollar Index: There was a slight reduction in the spec long of the DI to 58.3K from 39.3K last week. Small specs are a 6.7 ratio long and the large specs are a 3.1 ratio long.

– Euro (EUR/USD): The huge spec short position in the euro continues to grow and is now up to 206.7K compared to 199.9K last week. The short position grew despite a small rally in the market. Rather than cover shorts, the specs sold more. Large specs are a 3.8 ratio short and the small specs a 2.3 short. Spreading/options represent a large 12.4% of the 545K total OI.

– British Pound Sterling (GBP/USD): Large specs joined the small specs and flipped to the short side of the pound, though their selling was timid. The total spec short in the pound is up to 11.8K, a nominal position for a market with 175K open contracts. Since the cut off for the report, the pound was rallied every day.

– Japanese Yen (JPY/USD): There was a small reduction in the large spec short to 145K, down from 153.6K in the previous week. Considering the size of the rally in the yen, it is surprising there was not more short covering. The large specs are a 6.6 ratio and the small specs are a 3.1 ratio short.

– Swiss Franc (CHF/USD): Concern the peg to the euro will stay may have resulted in SF longs to liquidate. The total SF short has swollen to 35.5K from 30.5K last week. Small specs are a 4.3 short and the large specs are a 2.4 short.

– Canadian Dollar (CAD/USD): The large specs added to their short position in the loonie. The total spec short is up to 28.4K from 30.5 last week. The option spreading category is 8.8% of the total OI in the C$. This is a large position for option trading in the C$.

– New Zealand Dollar (NZD/USD): Trade remains sparce in the NZ$ after the recent central bank intervention. The small trader is not a big player in this market but they are now a 2.7 ratio short in the tiny trade.

– Australian Dollar (AUD/USD): There was a small increase in the total spec short to 48.4K from 46.4K last week. This was in spite of a reduction in the total OI of 11.6. The increase in the short position was caused by the large specs who reduced both their long and short positions. The total OI went down from 160K to 149. Is the Aussie getting ready for a break out?

Currency Commitments of Traders with Delta-adjusted Options and Futures Combined, data through October 14, 2014