Speculators are Less Bullish the Yen and Scramble to Cover Peso Shorts

thinking out of the box marc

It is difficult to discern an overall pattern among the changes in speculative positioning in the currency futures in the CFTC reporting week ending October 18.  

Most position adjustments were minor.  Nine of the 16 gross speculative positions we track were adjusted by less than 5k contracts. There were three adjustment of more than 10k contracts.   The euro account for two of them.

The bulls tried to pick a bottom of the euro has it approached  the $1.10 area.  They added 13.9k contracts to their gross long position, lifting it to 128.2k contracts.   The bears felt emboldened and added  29.7k contracts to their gross short position, which now stands at 2374k contracts.

Speculators also made a significant adjustment to their gross short Mexican peso position. They covered 25.8k contracts (leaving them with 64.1k contracts still short).  While the reporting period ended the day before the third US Presidential debate, the odds of a Trump victory has steadily diminished over the past few weeks.  The peso has been the best performing currency in the world since September 26, but we suspect that the gains spurred by unwinding of the “Trump-effect” has largely run its course.

There are a two other notable developments.  First, speculators covered short sterling positions for the second consecutive week. Over the two weeks, 10k contracts have been covered, leaving 144.1k  gross shorts contracts.  There have been only four weeks since the UK referendum that shorts have been reduced.

Second, yen bulls have pared their gross long position for the second week.  They liquidated 4.3k contracts, leaving a gross long position of 75k contracts.  Over the two week period, speculators have cut their gross long position by 27k contracts.

Bulls and bears in the light sweet crude oil futures market moved to the sidelines.  The bulls sold 19k contracts to shave their gross long position to 578.5k contracts.  The bears covered 13.4k contracts to reduce their gross short position to 170.5k contracts.  The result was a 5.7k contract reduction of their net long position (to 408k contracts).

Speculators in the US 10-year Treasury futures market grew more caution as the yield reached 1.80%.  The gross short position was reduced by 50.3k contracts, leaving 563.3k.  Some bargain hunting saw the gross long position increase by 5.8k contracts to 663.2k.  The net long position more than doubled to 99.9k from 43.8k contracts.

18-Oct      Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -109.3 -93.5 128.2 13.9 237.4 29.7
Yen 37.0 45.9 75.0 -4.3 38.0 4.6
Sterling -91.6 -95.5 52.6 2.2 144.1 -1.7
Swiss Franc -16.4 -9.4 18.3 -1.8 34.7 5.2
C$ -14.3 -11.7 23.7 -7.1 38.0 -4.5
A$ 30.0 26.1 80.5 7.1 50.5 3.2
NZ$ -0.2 -7.7 29.5 -1.4 29.7 -9.0
Mexican Peso -30.7 -51.8 33.4 -4.7 64.1 -25.8
(CFTC, Bloomberg) Speculative positions in 000’s of contracts