Weekly Speculative Positions (as of May 23): Speculators Remain Bearish the Dollar and Bullish Bonds

Swiss Franc

The biggest short CHF, however, happened in June 2007, when speculators were net short 80K contracts. Shortly after, the U.S. subprime crisis started. The carry trade against CHF collapsed.

The reverse carry trade in form of the Long CHF started and lasted - without some interruptions - until the peg introduction in September 2011.

In mid 2011, the long CHF trade became a proper carry trade - and not a reverse carry trade anymore - because investors thought that the SNB would hike rates earlier than the Fed.

CHF Speculative Positions

Last data as of May 23:

The net short CHF position has fallen from 21.1 short to 19.8K contracts short (against USD).

But the major movement was that speculators are net long the euro now and not the dollar any more. This implies that they are also long Euro against CHF.

Speculative Positions

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source: Oanda

In the CFTC reporting week ending May 23 speculators in the futures market continued to largely position themselves for further dollar weakness. The gross short position in the currencies were reduced, with the exception of the Swiss franc (+0.8k contracts) and the Mexican peso (+21.7k). The jump in gross peso shorts (almost 50%) was larger than anything that occurred during the US presidential campaign when Trump’s vitriolic comments weighed on the peso.

Speculators mostly added to gross long positions. The exceptions were the Australia and Canadian dollars. Speculators covered 9.4k previously sold contracts in both currencies. The gross long yen position was flat.

In addition to the dramatic rise in peso shorts, the only other significant position adjustments (more than 10k contracts) was in euro. The bulls added 10.8k contracts to the gross long position. It stands at 175.0k contracts, as headed back toward the record reached in mid-April near 186k. The bears covered 16..4 short contracts, reducing the gross short position to 110.2k, which is the smallest since mid-2014. These gross position adjustments meant that the net long position rose to 64.8k contracts, Note that at the end of last month, the net speculative position was short nearly 21k contracts.

Sterling position adjustments were unremarkable. The gross longs rose by less than a thousand contracts, while the 8.3k short contracts were covered. However, what ought not be lost is how dramatic of an adjustment has taken place over the past month. That adjustment lies with shorts capitulating more than new longs being established. Specifically, the gross short position has been halved to 73k contracts since the end of April. The gross longs have actually slipped 10% to 49.2k contracts. The net short position of 23.9k contracts compares to 91.2k short at the end of April.

The conventional approach emphasizes the net position. It will note that the net short Canadian dollar position rose to a new record high of 99.1k contracts. However, what is missed is that the gross shorts were cut by 8.3k contracts (to 128.8k). The reason this is masked on the net level is because more gross longs were liquidated (9.4k contracts).

The bulls continue to dominate the 10-year Treasury note futures market. They added 54.8k contracts to the gross long position, lifting it to 947.8k contracts. This is the largest gross long position since the record was set in August 2007, near 954k contacts. More shorts capitulated, as 67.6k contracts were covered, leaving 585.3k contracts still short. About 300k contracts have been covered since the end of February. The net long position of 362,5k contracts is the largest in nearly a decade.

Speculators moved to the sidelines in the crude oil future market in the days ahead of the OPEC meeting. The bulls liquidated 50.5k contracts to bring the gross long position down to 595.5k contracts. Nearly 95k short contracts were covered, leaving a gross short position of 222.5k contracts. Despite the smaller positions, the net long position rose 44k contracts to 373.0k. The record was set in February near 537k contracts.