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Weekly Speculative Positions (as of May 09): Significant Position Adjustment in the Currency Futures

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 09: The net short CHF position has fallen from 17.7 short to 15.2K 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 Choose Currency[embedded content] source: Oanda The Commitment of Traders reporting period ending May 9 was particularly active. In most weeks, there is often only a couple of significant adjustments to the speculative positioning. In this recent reporting period there were several.

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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 09:

The net short CHF position has fallen from 17.7 short to 15.2K 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

Choose Currency

source: Oanda

The Commitment of Traders reporting period ending May 9 was particularly active. In most weeks, there is often only a couple of significant adjustments to the speculative positioning. In this recent reporting period there were several.

We begin with euro were a powerful short squeeze continued. Speculators covered 27.9k previous sold euro contracts, reducing the gross short position to 133.2k. This is half  record peak this past October. To appreciate the speed of the move though, recall that as recently as mid-April the gross short position was over 200k contracts. The shot squeeze was sufficient to swing to net position long (22.4k contracts) for the first time in three years.

There was an even more powerful short squeeze in sterling. The shorts where chopped by a third to 91.7k contracts, a 43.9k cut. The longs scaled out of 9.4k contract, leaving them with 44.9k gross long. The net short position fell to 46.8k contracts from 81.4k, and is the smallest since last July.

The shorts also ran to cover in the Mexican peso. Consider that the speculative gross short position was reduced by 53.4k contract to 22.6k.  The gross longs barely changed (+1.4k contracts). The net position jumped to 69.9k contracts from 15.1k.

The bears added 10.9k contracts to their gross short yen position, lifting it to 78.9k contracts. The bulls also saw opportunity and added 5.1k contracts to the gross long position. The net short position increased to 36.3k from 30.5k contracts.

The Canadian dollar’s trend remained in place. The bears had the whip hand. The bulls cut the gross long position by 19.2k contracts. It stands at 47.4k contracts. The bears added 19.4k contracts to set a new record of 133.6k contracts. It also edges past the euro as the largest gross short currency futures position.

The bulls press forward in the 10-year Treasury note futures. They added 31.3k contracts to their gross long position. It stands at 861.8k contracts. The bears bought bask 17.9k contracts previously sold. The gross short position stands at 632.7k contracts. These adjustments lifted the net long speculative position to 229.1k contracts, the largest since late 2007. Recall that at the end of February there was a record net short position over 400k contracts.

Both bulls and bears saw opportunity in the oil futures market. The gross long position increased by 24.5k contracts (to 655.2k), while the gross short position jumped 68.9k contracts (to 326.4k). The net long position slipped by 44.4k contracts (even though the bulls have a larger position) to 328.8k contracts.

9-May Commitment of Traders
Net Prior Gross Long Change Gross Short Change
Euro 22.4 -1.7 155.6 -3.8 133.2 -27.9
Yen -36.3 -30.5 42.6 5.1 78,9 10.9
Sterling -46.8 -81.4 44.9 -9.4 91.7 -43.9
Swiss Franc -15.2 -17.7 8.5 4.0 23.7 1.5
C$ -86.2 -47.7 47.4 -19.2 133.6 19.4
A$ 25.8 42.7 56.5 7.7 30.7 9.2
NZ$ -10.8 -12.0 12.1 -7.1 22.9 -8.3
Mexican Peso 69.9 15.1 92.5 1.4 22.6 -53.4
US Treasuries 229.1 278.3 861.8 31.3 632.7 -17.9
Crude Oil 328.8 284,4 655.2 24.5 326.4 68.9
(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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