Speculators Make Significant Adjustments in the Currency Futures

In the week after the BOJ and FOMC meetings, speculators made several significant adjustments to gross positions in the futures market. However, there was not clear pattern.

Of the 16 gross positions we track, five adjustments were more than 10k contracts.  Of these five, two were large adds to gross long positions. In the remaining three, speculators cut gross long positions.

The bulls added 12.3k yen contracts to lift their gross long position to 97.4k contracts.  It is the largest long position since April.  The bears added 2.2k to their gross short position, raising to 28.5k contracts.

Sterling bulls are a fickle lot.  After adding almost 29k contracts to their gross long position in the CFTC reporting week ending September 23, they liquidated 21.1k contracts in the most recent reporting period.  The gross long position stands at 48.2k contracts.  which matches the four-week average (~49.2k contracts).

Yet something more than fickleness appears to be at work.  This is the third time this year that there has been a sharp jump in gross long sterling positions followed by a large liquidation the  following week.  Each occurred around he quarterly expiration.  It did not happen last year or the year before.   Separately, note that the bears added 8k contracts to lift their gross short sterling position to 135.9k contracts, a new record.

Occasionally around the quarterly expiration, the speculative positioning in the Swiss franc also be comes volatile.  In the latest reporting period, speculators cut the gross long franc position by more than half to 12.8k contracts (a 14.5k contract liquidation).  The previous week it jumped by 7.2k contracts, or about a third.  The gross short position changed by about a hundred contracts.  The liquidation of the longs drove the net position from long 8.4k contracts to short 6.0k.  Speculators were short francs briefly in August.

The bulls liquidated 22.6k Canadian dollar contracts, which brought the gross long position to 34.6k contracts.  The prior week the bulls added 11.5k contracts.    The Canadian dollar does not appear prone to such large swings around expiration.  It is the largest weekly adjustment in five years.  The bears added 5.3k contracts, lifting  the gross short position to 46.2k contracts.  The net position swung short 11.6k contracts (from 16.3k net long contracts).  It is the first net speculative short position since April.

The last significant speculative position adjustment was with the Australian dollar futures. Speculators bought 14.3k contracts, raising the gross long position to 62.9k contracts.  It follows a 14.6k-contract liquidation the previous week.  The Australian dollar, historically, appears more vulnerable to the quarterly expiration than the Canadian dollar, though it tends to be more modest than seen in sterling.  The bears, perhaps seeing the Aussie approach the $0.7700 area in spot,which has been an important cap,  added 6.2k contracts to the gross short position.  It now stands at 47.9k contracts.  The net long position doubled to 15.0k contracts.

Although bulls and bears added to positions in the US 10-year note futures, the bulls maintained the whip hand.  They added 33.7k contracts to increase the gross long position to 718.3k contracts.  The bears added 10.2k contracts so they now have 577.9k gross short contracts. The net long speculative position increased to 140.4k contracts from 116.9k.  A four-year high was recorded in late-July with a net long position of 186k contracts.

Market participants may have been skeptical of an OPEC agreement, but going into the Algiers meeting, speculators extended their long light sweet crude oil positions.  They added 10.7k contracts, which lifted the gross long position to 543.8k contracts.  The record long position was set in mid-August near 570k contracts. Speculators covered 2.1k contracts to pare their gross short position to 252.2k contracts.  The gross long position rose 12.8k contracts to 291.6k. Note that the record large long position was recorded in mid-August near 570k contracts. 

27-Sep Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -76.0 -85.0 100.5 4.8 176.5 -4.2
Yen 68.9 58.8 97.4 12.3 28.5 2.2
Sterling -87.7 -58.7 48.2 -21.1 135.9 8.0
Swiss Franc -6.0 8.4 12.8 -14.5 18.8 -0.1
C$ -11.6 16.3 34.6 -22.6 46.2 5.3
A$ 15.0 6.8 62.9 14.3 47.9 6.2
NZ$ -6.8 -7.9 34.2 -0.6 41.0 -1.7
Mexican Peso -85.9 -89.3 24.9 4.3 110.7 0.8
(CFTC, Bloomberg) Speculative positions in 000's of contracts


Speculators Make Significant Adjustments in the Currency Futures Speculators Make Significant Adjustments in the Currency Futures Reviewed by Marc Chandler on October 01, 2016 Rating: 5
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