Notes on IMM Positioning

The weekly Commitment of Traders from the IMM currency futures were reported just before the weekend. There are several noteworthy developments.

First, as of last Tuesday, the net short speculative position was a record at 43.7k contracts. The subsequent price action and open interest warns that the net short were extended in recent days.

Second, the net speculative yen positions swung to the long side (+7.1k vs -4.3k). This is the first time the specs have been net long yen since mid-Dec.

Third, sterling shorts were extended to 33.9k from 27.1k the previous week. While the net speculative position has not been long sterling in over a year, this is the largest net short position since late Oct.

Fourth, the net speculative position switched to short Swiss francs (-1.8k vs +5.7k). The speculative community has been net short Swiss francs in late Dec through early Jan. The market does not appear to have much conviction.

Fifth, the net speculative positions in both the Canadian and Australian dollars were pared back considerable. The net long C$ positions were cut from almost 26k to 15.3k contracts. The net long position peaking in mid-Jan at almost 49k contracts. The net spec position has been long since last May. Despite the frustration, there does not appear to have been a capitulation yet and sentiment still seems constructive. The net speculative long position in Australian dollars has been slashed from the peak in late Jan near 63k contracts to 33.3k as of last Tuesday. The sharp AUD decline in the second half of next week warns that additional liquidation likely took place. Underlying sentiment remains favorable. Shifting interest rate expectations and knock-on from China appeared to have triggered the position adjusting. Fundamental considerations should continue to underpin the currency.