Speculators Take Big Bites in the Futures Market

rainbow sprinkles on donut marc

In the first week of June, which featured both the largely uneventful ECB meeting, and the surprisingly weak US jobs data through the first couple sessions this week saw speculators make several significant adjustments to their positions. Overall the adjustment was in favor of the US dollar and US Treasuries. Of note, the dollar tended to weaken in the spot market over in the CFTC Commitment of Traders reporting week ending June 7.   After the end of the report period, the dollar recovered.  

There were two exceptions to the speculative favoring of the US dollar: The yen and New Zealand dollar.  The net long speculative positions of both increased.   Speculators added 2.2k contracts to their gross long Mexican peso positions but grew the gross short position by even more (5.9k contracts), resulting in small increase in the net short position.

Speculators grew both the gross long and short New Zealand dollar futures positions as well.  The bulls added 6.6k contracts to the gross long position and 3.6k contracts to the gross short position. Consequently, the net long position edged slightly higher (8.5k contracts from 5.5k).

The net long yen position swelled to 42.9k contracts from 14.8k.  It is the biggest increase since January.  The bulls swooped in to add 21.3k contracts to the gross long position.  This snapped a three-week liquidation streak that saw the gross longs nearly halved from almost 89k contracts to 47k.   The net short position was shaved by 6.7k contracts, leaving 25.4k contracts.  The yen was the only currency futures we track that the speculators reduced short exposure in the latest reporting period.

The bears made strong statements in the euro and sterling.  They added 24.7k contracts to the gross short euro positions, which is the most since last March.  The gross short position has risen from about 123k four weeks ago to 160.6k now.  The bulls trimmed the gross longs by 4.7k contracts to 93.5, which is still the largest such position among the currency futures.

The bears had even a more veracious appetite for selling sterling.  They increased the gross short position by 33.2k contracts to 102.6k.  This is the biggest move since 2013 and the largest change in five years.  The bulls seemed paralyzed.  They peeled off two hundred contracts from their gross long position, leaving them with 36.3k contracts.  These adjustments resulted in a doubling of the net short position from 32.9k to 66.3k contracts.

Although Swiss franc speculative position adjustment was not large, it was counterintuitive.  The market has been rife with talk of Swiss franc buying, and the euro-franc cross has fallen to four-month lows.  However, the speculators in the futures market are not buying it.  Literally.  They liquidated 2.6k gross long franc contracts, leaving them with 21.6k.  This is the smallest gross long futures position in speculators’ hands.  The gross short position rose by 7.1k contracts to 31.3k contracts.  This is the largest speculative gross short position in four months.

US 10-year Treasury futures were in heavy demand.  The gross long position jumped by 106.4k contracts to 511k.  This is the biggest jump in three years.  The shorts covered almost 50k contracts, leaving the gross short position of 495.8k contracts.  The result of these gross position adjustments was  to swing the net position from short 141k contracts to long 15.2k.

The bears made a stand in oil.  The gross short position rose by 24.7k contracts to 200.3k contracts. This is the biggest increase since January.  The bulls were still moving forward.  They added 2.8k contracts to their gross long position, lifting it to 525.5k contracts.  The net long positions was trimmed by almost 22k contracts to 325.2k.

7-Jun      Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -67.1 -37.7 93.5 -4.7 160.6 24.7
Yen 42.9 14.8 68.2 21.3 25.4 -6.7
Sterling -66.3 -32.9 36.3 -0.2 102.6 33.2
Swiss Franc -9.6 0.1 21.6 -2.6 31.3 7.1
C$ 24.5 26.3 37.4 -1.3 15.9 3.4
A$ -15.8 -4.8 35.4 -9.2 51.2 1.9
NZ$ 8.5 5.5 38.6 6.6 30.0 3.6
Mexican Peso -59.3 -55.6 22.4 2.2 81.7 5.9
(CFTC, Bloomberg) Speculative positions in 000’s of contracts