Speculative Sentiment Shifts

Marc Chandler Marc to Market

The combination of a robust US jobs report, speculation of bolder action by Japan, the possibility that the ECB drops the capital key to overcome the ostensible shortage of some core bonds (e.g. German bunds), and the anticipation of easier BOE policy appears to have generated a change in sentiment among speculators in the currency futures market.

A pattern was clear in the speculative position adjustments in the Commitment of Traders reporting week ending July 12. In the euro, yen and sterling, speculators trimmed gross long exposure and added to gross short positions.

Speculators peeled back 4.4k euro long contracts (leaving 107.6k) and added 8k short contracts (bringing the gross short position to 195.3k contracts). The net short position of 87.7k contracts is the largest sine the end of January.

Speculators trimmed 1.7k gross long yen futures contracts (to 85.4k) and increased the gross short position by more than 50% to 37.8k contracts (from 23.4k). The net position of 47.5k contracts is the smallest net long yen position in five weeks.

Speculators pared the gross long sterling position by 5.7k contracts (to 40.0k) and added roughly the same amount (5.3k) to the gross short position, lifting it to 100.1k contracts. The net short position of 60.1k contracts is the second largest in three years and only trailed the net short position in early June.

Such a clear pattern was not evident in the other currency futures, but the tendency was for speculators to add to gross long positions (the Canadian dollar was the exception) and reduce gross short positions (the Australian dollar was the exception). The position adjustments were generally small, but sufficient to turn the net speculative New Zealand dollar position long after being net short for the past month.

In addition to the 14.4k contract jump speculators' gross long yen position, the only other significant speculative gross position adjustment was the 12.1k contract increase in Aussie longs. The 45.9k gross long contracts is the largest since late-May.

The net long speculative oil futures position was trimmed by 4.9k contracts to stand at 294.8k contracts, the smallest in eight weeks. This smaller net position was the result of the bulls trimming 3.2k contracts from their gross longs (to 516.2k contracts) and the bears adding 1.7k contracts to their gross short position (to 221.4k contracts).

Both bulls and bears reduced their positions in US Treasuries. This resulted in a sharp rise in the net long position (131.4k from 96.1k contracts). The bears liquidated 6.2k gross long contracts (to 647.6k) while the bears covered 41.5k gross short contracts (leaving them with 516.2k contracts).

	Net	Prior	Gross Long	Change	Gross Short	Change
Euro	-87.7	-75.3	107.6	-4.4	195.3	8.0
Yen	47.5	63.6	85.4	-1.7	37.8	14.4
Sterling	-60.1	-49.0	40.0	-5.7	100.1	5.3
Swiss Franc	6.7	8.7	23.3	0.9	16.6	2.8
C$	17.2	11.5	40.0	-1.1	22.8	-6.7
A$	16.2	4.9	45.9	12.1	29.7	0.8
NZ$	1.0	-1.4	31.7	1.1	30.7	-1.3
Mexican Peso	-37.1	-44.9	28.6	4.4	65.8	-3.3

(CFTC, Bloomberg) Speculative position in 000's of contracts

Author

Marc Chandler

Marc to Market

Experience Marc Chandler's first job out of school was with a newswire and he covered currency futures and Eurodollar and Tbill futures.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.