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Weekly Speculative Positions (as of May 02): Euro Shorts Covered, Yen Longs Liquidated

Summary:
Swiss Franc Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts. 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 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 02: The net short CHF position has risen to 17,7K contracts (against USD). Speculative Positions Choose Currency[embedded content] source: Oanda 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.

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Swiss Franc

Speculators were net short CHF in January 2015, shortly before the end of the peg, with 26.4K contracts. Then again in December 2015, when they expected a Fed rate hike, with 25.5K contracts.

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 02:

The net short CHF position has risen to 17,7K contracts (against USD).

Speculative Positions

Choose Currency

source: Oanda

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 650,6k 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 16.1 -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
US Treasuries 179.8 145.1 830.4 4 650.6 38.7
Crude Oil 373.1 334.5 630.7 11.9 257.5 50.6
(CFTC, Bloomberg) Speculative positions in 000’s of contracts


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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

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