Speculative Positioning Update: Commitment of Traders

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There were two significant shifts in net speculative positioning in the week ending March 13, according to the latest Commitment of Traders report.  The first is an acceleration of the short covering in the euro.  The second is the extension of short yen positions.  

The fact that the euro held support near $1.30 is important.  That is the bottom of the $1.30 to $1.35 trading range that has confined the euro through most of the first quarter.  There is scope for the euro to test the $1.3250-$1.3300 area in the days ahead.   The dollar may fare a bit better against the yen, but is more likely to consoldiate then trend higher.  

In the week through March 13, the net speculative short euro position was cut from 116.4k contracts to 99.3k.  It is the first time the net shorts have fewer than 100k contracts since early December.  The change is almost solely the function of shorts being reduced (16.k) than new longs being established (382).  

The net short yen position jumped from 19.4k to 42.4k contracts in the most recent reporting week.  This is the largest net short position since April 2011.  Since the financial crisis began in the second half of 2007, the net short yen position has been only rarely and briefly larger than it is now.  The shift in positioning reflects almost in equal measure longs capitulating (11k) and shorts being established (12k).  

Net short sterling edged higher to 41.8k contracts from 37.1k.  This is the largest net short position since early December.  It was largely a function of new shorts entering the market, but these were in weak hands and the fact that $1.56 support held in the spot market suggests that some of these short may have been forced out.  Sterling looks poised to re-test the upper end of its range in the $1.59-$1.60 area.  

For the most part, Swiss franc, Canadian dollar and Australian dollar positions were little changed.  The net short Swiss franc position was cut by about 5k to 14.8k contracts, which is the smallest net short position since in a little more than a month.  

The net long Canadian dollar position edged higher by less than 1000 contracts, but it was the sixth consecutive weekly build and the largest net long position since July 2011.  Nevertheless, the Canadian dollar appears poised to suffer on the crosses in the days ahead, especially against the euro, sterling and Australian dollars.  

The net long Australian dollar position rose to 66.8k from 61.7k, due to an increase in longs and a reduction of short positions are roughly the same amount.   The Aussie held key support near $1.04 and can recover toward $1.0650-$1.07 in the period ahead.  

The net long Mexican peso position was grown for the eighth consecutive week and is the largest such position since last August.  Interestingly, this was more a function of shorts capitulating (10.6k) rather than new longs entering (1.9k).  

Lastly, given the sharp jump in US yields recently, we took a look at the Commitment of Traders for the futures on the 10-year Treasury note..  The net short position leaped to 77.3k from 23.3k contracts and is the largest short position in five months.  Longs were cuts by 30.5k and and shorts added about 23.4k contracts.  
Speculative Positioning Update: Commitment of Traders Speculative Positioning Update: Commitment of Traders Reviewed by Marc Chandler on March 17, 2012 Rating: 5
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