What is most noticeable about the CFTC Commitment of Traders report for the reporting week ending November 15 is what is not there: Activity. With the Australian dollar being the sole exception, we are struck by the apparent fact that dramatic spot price action and a what seemed like an impulsive trend move seemed not to be reflected in the futures position adjustments by speculators.
Given the strength of the US dollar after the election, which this report covers, it is not surprising that among the eight currency futures we follow, there was some light profit-taking by speculators in six of the gross short currency futures. The exceptions were the Japanese yen and the Mexican peso, where gross short positions were extended.
The speculators cut exposure in the Australian dollar. The bulls, caught wrong-footed, liquidated 14.7k contracts, leaving them with gross long 77.8k contracts, the second largest gross long position behind the euro, where speculators have a gross long position of 121.6k contracts. The bears covered a third of their gross short position or 15.1k contracts. The gross short speculative position stood at 36.3k contracts as of the end of business on November 15. This results in a net long position of 41.5k contracts, the largest speculative long position among the currency futures.
In addition to the Australian dollar, speculators have a net long position in the New Zealand dollar (2k contracts) and the Japanese yen (20.7k contracts). The net long speculative yen position is the smallest is six months. The net long position has fallen as the gross longs were reduced the recent peak of 102k to 67.1k contracts, a 35k contract liquidation since early-October. The gross shorts nearly doubled to 46.4k contracts from 26.3k where it bottomed in late-September. The gross short yen position is the largest since January.
In the 10-year Treasury note futures, speculators tried picking a bottom (top in yields) with a significant move. The added 143.3k contracts to its gross long position, lifting it to 695.5k contracts. It is the third largest gross long position of the year. The record speculative gross long position was set in August 2007 with 954k contracts. The bears took profits on about 10% of their gross short position of 65.8k contracts. This reduced the gross short position to 559.1k contracts. Owing to this gross position changes, the net position swung from short 71.6k contracts to long 137.4k The December note futures continued to sell-off after the end of the reporting period. We suspect some of the late longs are in weak hands.
In the light sweet crude oil futures, the speculative position adjustment was much more balanced than in the T-Note futures. The bulls added 20.6k contracts to the gross long position. It stood at 581.4k contracts. The bears added 21.8k contracts to the gross short position, raising it to 305.1k contracts. The net long position slipped 1.2k contracts to 276.3k.
Opinions expressed are solely of the author’s, based on current market conditions, and are subject to change without notice. These opinions are not intended to predict or guarantee the future performance of any currencies or markets. This material is for informational purposes only and should not be construed as research or as investment, legal or tax advice, nor should it be considered information sufficient upon which to base an investment decision. Further, this communication should not be deemed as a recommendation to invest or not to invest in any country or to undertake any specific position or transaction in any currency. There are risks associated with foreign currency investing, including but not limited to the use of leverage, which may accelerate the velocity of potential losses. Foreign currencies are subject to rapid price fluctuations due to adverse political, social and economic developments. These risks are greater for currencies in emerging markets than for those in more developed countries. Foreign currency transactions may not be suitable for all investors, depending on their financial sophistication and investment objectives. You should seek the services of an appropriate professional in connection with such matters. The information contained herein has been obtained from sources believed to be reliable, but is not necessarily complete in its accuracy and cannot be guaranteed.
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