A Quick Look at Commitment of Traders in the Currency Futures

The speculative positioning in the currency futures market gives insight into a particular market segment. It is understood as a microcosm of trend followers and momentum players. In recent weeks, we have been not simply looking at the net position, but have drilled deeper to see the changes in the long and short positions that generate the shift in the net position.

Euro: In the week ending March 6th, the net speculative short position rose to 116.5k contracts from 109.7k in the prior week. Both shorts and longs added to positions. The longs grew by a little more than 4k contracts to 39.9k, which is the largest long since very early in January. The shorts added 11k and as of March 6, were short 156.4k contracts. The break down in the euro in the second half of the week, perhaps a “buy the rumor, sell the fact” activity following the Greek PSI, saw the longs exit out of frustration with the inability of the euro to rise through $1.33 in the spot market.

Yen: After reversing to a net short position in late February for the first time since May 2011, the net speculative short position was extended in the most recent week. The 19.4k net short contract compares with a net short position of 1.2k contract the prior week and is the largest net short position since last April. This was a function of both short and longs cutting positions. The longs culled 18.3k contracts to 33.3k, which is the smallest long position since last May. The shorts trimmed 122 contracts, but the 52.6k short position is still essentially the largest since April ’11. The dollar eased in the first half of last week against the yen, but rebounded smartly in the second half of the week, as Japan reported disappointing data and the equity markets rebounded.

Sterling: The net short position jumped to 37.1k from 23.2k, and is largest since mid-February. The resilience of the UK economy in various survey data was undermined by the poor industrial production figure at the end of the week. The market had expected a 0.3% increase in January industrial output and instead learned that it fell by 0.4%. The weakness was concentrated in the mining and quarrying sector and manufacturing output actually increased. Nevertheless, the technical tone deteriorated on the day of closing day of the Commitment of Traders report. On March 6, sterling posted an outside down day (trading on both sides of the previous day’s range and then closing below the previous day’s low) as the market appeared to give up on the attempt at the $1.60 level. Longs trimmed 4.6k contracts and the remaining 22.3k is the smallest long position since late January. The shorts added 9.2k contracts to 59.4k.

Swiss franc: The Swiss National Bank has deterred by speculative activity in the franc. The net speculative short position is essentially unchanged for the past three reporting weeks at about 19.5k. Both longs and shorts exited. It is the first trimming of short positions in about 10 weeks.

Canadian dollar: The net speculative long position grew for the fifth consecutive week and at 26k it is the largest since last August. The longs themselves added for the 8th consecutive week to stand at 55.9k. Shorts added 1.6k to 29k. The Canadian dollar recovered in the second half of last week and this may be picked up in next week’s Commitment of Traders report.

Australian dollar: The technical tone and fundamental backdrop of the Australian dollar have deteriorated over the past two weeks of so. The net long speculative position was trimmed to 61.k contracts from 78.2k. It is the smallest net long position since late January. The longs were trimmed 7.3k contracts, but remain above 90k for the seventh consecutive week. The shorts added 9.2k contracts and at 34.6k is the largest short position since early November. A break of $1.05 in the spot market may force more of the speculative longs to capitulate.

Mexican peso: The net speculative long position was extended for the 9th consecutive week and at 66.3k is the largest since early August. The longs added for the seventh week to stand at 84.5k contracts. Shorts added as well (5.1k contracts), and at 18.2k is the largest short position since late June. Strong US auto sales and manufacturing survey data is understood to be constructive for the peso, which finished last week at its best level against the greenback since early last September.