Euro Shorts Covered, Yen Longs Liquidated

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It was feast or famine in the adjustment of speculative positions in the currency futures market during the CFTC reporting period ending May 2. Speculators either made large adjustments or very small adjustments, and little in between.  

Speculators covered 17.7k previously sold euro contracts to reduce the gross short position 161.1k contracts. It has been reduced by around 46k contracts over the last few weeks.  The gross long position edged 1.6k contracts higher to 159.4k.  It has fallen by around 16k contracts in the past few weeks.  The net position was reduced primarily due to buying related to short-covering and now net short by 1.7k contracts, the least since June 2014.

Speculators liquidated 11.0k long yen futures contracts to 37.5k contracts.  The gross short speculative position fell to 68.0 contracts, a 7.4k decline.  The result was the net short yen position increased to 30.5k contracts from 26.9k.

The Canadian dollar was very much in play.  Some bulls tried picking a bottom and added 14k contracts to the gross long position, which stood at 66.6k contracts at the end of the statement period.  The bears were still in control.  They added another 19.1k contracts to the gross short position.  It stands at 114.3k contracts, which is the most since at least 1993.

It has been a rapid accumulation of gross short contracts.  It has doubled, for example, since the end of March.  The gross short position has increased for three weeks in a row and eight of the last nine.  Some of these late shorts are in weak hands.  The key reversal posted in spot before the weekend warns of their vulnerability.  This vulnerability is best understood by looking at gross positions, not net.

Outside of a 9.6k contract reduction of the gross short sterling position, speculators did not make any other gross position adjustments of more than 5k contracts.  Nearly a third of the 16 gross positions we track were adjusted by less than one thousand contracts.

Overall, speculators showed a penchant for reducing the gross short currency exposure.  The only exceptions were Mexican pesos and Canadian dollars.  There did not appear to be a clear pattern among the gross long position adjustments.

The bears in the oil market pressed their advantage while some bulls bought into the weakness.  The bears added 50.6k contracts to their gross short position, lifting it to 257.5k contracts, the largest of the year.  Almost 12k contracts were added to the gross long position.  It stands at 630.7k contracts. The net long position fell by 38.7k contracts to 373.1k.

The bears in the 10-year Treasury note futures tried picking a top ahead of the FOMC meeting and US jobs data.  They added 38.7k contracts so the gross short position was lifted to 6506k contracts.  The longs stayed pat, adding a mere 4k contracts to round up the gross long position to 830.4k contracts.  The net long position fell to a little less than 180k contracts from 214.6k.

2-May      Commitment of Traders
Net  Prior  Gross Long Change Gross Short  Change
Euro -1.7 -20.9 159.4 1.6 161.1 -17.7
Yen -30.5 -26.9 37.5 -11.0 68.0 -7.4
Sterling -81.4 -91.2 54.3 0.2 135.6 -9.6
Swiss Franc -17.7 -17.3 4.4 -3.2 22.2 -2.8
C$ -47.7 -42.6 66.6 14.0 114.3 19.1
A$ 42.7 42.7 64.2 -0.5 22.9 -0.5
NZ$ -12.0 -15.4 19.2 0.5 31.2 -2.9
Mexican Peso 15.1 16.0 91.1 -0.5 76.0 0.4
(CFTC, Bloomberg) Speculative positions in 000’s of contracts