Contract Roll may Have Elevated Position Adjustments

Different umbrella in yellow marc

The expiry of the December currency futures may spur more than normal speculative position adjusting.  The out-sized 27.9k contract jump in the speculative gross long Swiss franc futures position is a prime example.  It was more than enough to swing the net speculative position back to long (7.1k contracts).  If our understanding it correct, it should quickly be unwound.

Of the 16 gross currency positions we track, five were in excess of 10k contracts.  This is unusually large.  However, two of them were a continuation of a recent pattern.  Speculators have been covering gross short euro positions, even as the euro has fallen to new multi-year lows. Specifically, speculators covered 15.6k contracts to bring the gross short position to 195.5k contracts.  It is the third consecutive week of short covering, during which time it has covered 60k previously sold contracts.

The other trending positioning for speculators has been the piling into short yen positions.  Speculators added 13.8k contracts, lifting the gross short yen position to 139.6k contracts.  This is a cumulative rise of 67k contracts over the past three weekly reporting periods.   There has been a dramatic change in the net speculative position.  It was long almost 69k contracts in late October.  It is now net short 75.4k contracts.

However, like the Swiss franc, we suspect that the 11.9k contract reduction of the gross short Canadian dollar position may have also been elevated by the expiry of the December future contracts. The gross short position stands at 34.6k contracts.  The net short position was nearly halved to 11.8k contracts.

The 10.2k contract increase in the speculative gross short peso may have been a continuation of the bearishness toward the peso.  The gross short position has been trending higher since bottoming in late October near 54k contracts.  It now stands at 87.5k contracts.

Elsewhere, the net long Australian dollar position continues to be trimmed.  It fell nearly 10k contracts in the latest reporting period to stand at 3.9k contracts.  In late November is was more than ten-fold larger.  Lastly,  we note that despite sterling’s heavy tone in the spot market, speculators looked to take some profits and pick a bottom.  They covered 9.4k gross short contracts (leaving 103.5k) and added 3.6k contracts to the gross longs position (lifting it to 44.2k contracts).  The net position (-59.4k contracts) has been reduced for three consecutive reporting periods.

Bottom picking was evident in the US 10-year note futures.  Speculators added 57.5k contracts to the gross long position.  It stands at 509.5k contracts.  The bears were undeterred and added 10.2k contracts to the gross short position, raising it to 730.6k contracts.  As a result the net short position was slimmed to 221.1k contracts from 268.4k.

Both bulls and bears moved to the sideline in the oil futures.  The bulls lightened up by 11.1k contracts, bringing the gross long position to 603.7k contracts.  The bears covered 25k contracts, leaving them gross short 167.6k.  The results was a 13.9k increase in the net long position to 436.7k contracts.

20-Dec      Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -78.0 -87.5 117.5 -6.1 195.5 -15.6
Yen -75.4 -63.4 64.2 1.8 139.6 13.8
Sterling -59.4 -72.3 44.2 3.6 103.5 -9.4
Swiss Franc 7.1 -25.3 33.5 27.9 26.4 -4.5
C$ -11.8 -21.9 22.2 -1.8 35.0 -11.9
A$ 3.9 13.5 38.3 -2.0 34.4 7.6
NZ$ -7.0 -3.7 28.3 -1.1 35.3 2.2
Mexican Peso -66.7 -57.7 20.8 1.8 87.5 10.8
(CFTC, Bloomberg) Speculative positions in 000’s of contracts