Speculators Turn More Bearish Euros and Less Bullish the Yen

bull and bear

Speculators turned more bearish the euro and less bullish the Japanese yen in the Commitment of Traders week ending October 11.  The dramatic shift in US presidential polls and the continued rally in oil appeared to have spurred speculators to reduce short Mexican peso positions and add to longs.

Speculators in the futures market added 20.1k contracts to their gross short euro position, lifting it to 207.8k contracts.  There were still a few speculators that tried picking a bottom before the euro slipped below $1.10 in the spot market.  The bulls added 8.6k contracts, lifting the gross long position to 114.3k contracts.

The largest speculative gross long and gross short position is in the euro.  The net short position rose to 93.5k contracts from 82.1k.  This is a two month high.  However, sterling’s net short position is larger at 95.5k contracts.  This is slightly smaller than the previous reporting period (-97.6k contracts).  This reflected the fact that speculators covered more gross short positions than liquidated gross long positions.  Specifically, the 6.4k long contracts were cut while 8.5k short contracts were covered (leaving the gross long position at 50.4k contracts and the gross short position of 145.9k contracts).

Yen bulls move may be having second thoughts in the face of the continued (three consecutive weeks) dollar recovery in the spot market.  They liquidated 22.7k contracts to leave a gross long position of 79.3k contracts.  The bears were not enticed and added nearly a hundred contracts to the gross short position, which now stands 33.4k contracts. The net long position of 45.9k contracts (down nearly 23k contracts in the latest reporting week) is the smallest in two months.

The net short Mexican peso position was slashed by 40% to 51.8k contracts.  It returned to levels seen in early-September.  The sharp drop was a function of speculative shorts covering and new longs being established.  The bears covered 18.4k gross short contracts, leaving them with still a substantial position of nearly 90k contracts.  This is the third largest among the currency futures we track, behind the euro and sterling.  The bulls added 15.7k contracts to lift the gross long position to 38.1k contracts.

In the previous reporting week, speculators largely added exposure to the currency futures.  They mostly reduced positions in the most recent reporting period.  Of the 16 gross positions we track, ten involved reducing exposure.  These ten position adjustments were equally divided between liquidating longs and covering shorts.

Although speculators remain net long US 10-year Treasury note futures, the bears are trying to move into ascendancy.  The bulls liquidated 31.5k contracts to bring the gross long holdings to 657.5k contacts.  The bears added 51.9k contracts to lift the gross short position to 613.6k contracts.  These gross adjustments led to a sharp drop in the net position to 43.8k contracts, down from 127.2k.

The speculative bulls tightened their grip on the light sweet crude oil futures market.  The net long position increased by 26.3k contracts to 597.6k.  The gross short position fell 24.4k contracts to 183.9k.  This resulted in a net long position of 413.7k contracts, a 50.7k increase.

Speculative Positioning in the Futures Market
Net Previous Gross Long Change Gross Short Change
Euro -93.5 -82.1 114.3 8.6 207.8 20.1
Yen 45.9 68.7 79.3 -22.7 33.4 0.1
Sterling -95.5 -97.6 50.4 -6.4 145.9 -8.5
Swiss Franc -9.4 -2.9 20.1 0.9 29.6 7.3
C$ -11.7 -14.1 30.8 -1.8 42.5 -4.1
A$ 26.1 23.9 73.4 -0.2 47.3 -2.3
N$ -7.7 -7.8 31.0 -1.3 38.7 -1.4
Mexican Peso -51.8 -85.9 38.1 15.7 89.9 -18.4
Source: CFTC, Bloomberg, 1000’s of contracts