Speculators Still Don't Believe the Dollar will Turn Higher

Speculative activity remained light in the latest CFTC reporting period ending August 30. There were no gross position adjustments that we recognize as significant; 10k contracts or more.

There were only three gross adjustments by speculators of more than 4k contracts. Speculators added 82.k contracts to their gross short euro position, bringing it to 190.2k contracts. That ended a four-week stretch during which speculators covered short euro exposure.

Speculators covered 9k gross short Canadian dollar contracts, leaving them with 24.4k contracts. Speculators cut their gross long Mexican peso position a little more than 25% or 7k contracts, bringing it to 19.8k contracts.

Of note, speculators net short sterling position was reduced by 2.5k contracts. It is a minor move but it snaps an eight week streak in which speculators were accumulating a large short sterling position. However, and this is an example of the benefit of looking at gross positions, not just net, is that speculators still added to their gross short sterling position (1.3k contracts to 132.1k). That streak remains intact and now stands at nine weeks. The reason the net short position fell was the bottom pickers outnumbered the trend followers. The gross long sterling position rose by 3.8k contracts (to 39.6k).

Speculators added to their gross long yen position for the fifth consecutive week. The 1.2k contract increase raises the gross long position to 91.6k contracts. We suspect that some of these late longs are vulnerable to being squeezed out. Given the interest rate differentials, it is expensive to be long yen against the dollar without momentum.

The net long speculative Canadian dollar position rose to 22.4k from 16.7k contracts. However, what is somewhat misleading about it is that speculators reduced their gross long position by 3.3k contracts. The covered 9.0k of the 33.4k gross short contracts, leaving them with 24.4k contracts.

Another pattern was evident. Speculators added to gross long positions of the euro, yen, sterling and Swiss franc. They were mostly sellers of the dollar-bloc and peso. The sole exception was with the New Zealand dollar, where speculators added 1.8k contracts to lift the gross long position to 31.7k contracts. Speculators also reduced gross short positions in among the dollar-bloc currencies and peso. In the European currencies and yen, there was no clear pattern among speculators.

The bulls retained the upper hand in the US 10-year Treasury futures. They added 57.5k contracts to lift the gross long position to 623.2k contracts. The bears picked up 4.4k contracts, giving them a gross short position of 521.7k contracts. The new long position jumped to 101.5k contracts from 48.4k. We suspect the heavy tone at the end of last week reflects some of the longs throwing in the towel.

Speculators moved to the sidelines in the light sweet crude oil futures. The bulls liquidated 16.7k contracts to bring the gross long position to 538.4k contracts. The bears covered 4.2k gross short contracts, leaving them with 197.1k. As a result, the net long position was trimmed by 12.5k contracts to 341.3k contracts.

30-Aug		Commitment of Traders
	Net	Prior	Gross Long	Change	Gross Short	Change
Euro	-81.9	-76.7	108.3	2.9	190.2	8.2
Yen	63.7	60.3	91.6	1.2	27.9	-2.2
Sterling	-92.5	-95.0	39.6	3.8	132.1	1.3
Swiss Franc	8.2	1.9	24.6	3.6	16.3	-2.7
C$	22.4	16.7	46.8	-3.3	24.4	-9.0
A$	42.6	42.8	70.4	-0.6	27.9	-0.4
NZ$	1.9	-0.9	31.7	1.8	29.9	-1.0
Mexican Peso	-33.2	-28.5	19.8	-7.0	53.1	-2.3
(CFTC, Bloomberg) Speculative positions in 000's of contracts