Note on Commitment of Traders

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There have been several interesting changes to the net speculative positions in the currency futures over the past week through Feb 28.  While not capturing the reversals in the euro and sterling at the end of the week, the data is still revealing.  

  

The most notable change has been that the net speculative position has swung from short to long yen for the first time since early June 2011. To be sure it is a small net short position of 1203 contracts.  The net speculative position was long 17.3k contracts in the prior week.  The shift was a function of longs being cut  and shorts adding.  Still the yen longs have not really capitulated as there are still some 57.5k long contracts in speculator or non-commercial hands.  

The net  euro short position continues to be trimmed.  As of Feb 28, it stood at 109.7k contracts, down from 142.2k contracts the prior week.  This is the smallest net short position since early Dec.  Longs added and shorts were cut to derive the net position.  The long positions have been growing for the past three weeks to stand at 35.8k.  Nevertheless the net short position remains among the largest over the past decade, with the sole exception being April-June period 2010.

Sterling longs and shorts were reduced by speculative participants and this produced the smallest net short position since mid-Sept 2011.  The net short position stood at 23.2k contracts down from a net short position of 31.3k contracts the prior week.  Sterling has buoyed by the general resilience of the UK economy, which in turn has dampened expectations that the quantitative easing would be extended when the current gilt purchase scheme is complete in May.  

Speculators continue to build long Canadian dollar futures positions.  The net long position rose to 22.5k from 14.1k contracts.  This is the largest net long position since mid-August.  This was a function of longs adding almost 3k contracts (to almost 51k) and short being cut by nearly 5.4k contracts.  Many observers have focused on the implications the recent rise in oil prices.  Yet, the correlation with the Canadian dollar is weaker than one might expected.  On a 60-day rolling basis (looking at percent change), the Canadian dollar and WTI have a correlation of about 0.54.  Since May last year the correlation has been between 0.40 and 0.65, meaning it is in the middle of that range now.  The 30-day correlation stands at 0.42, down from 0.72 at the start of February.   

The net speculative Australian dollar position stood at 78.2k contracts on Feb 28, the largest since last July. The longs added 11.4k contracts to stand at 103.6k contracts.  However, some speculators are beginning to pick a top and short positions rose by almost 8k contracts. 

The net long Mexican peso futures position rose to 60.7k from 49.4k contracts, which is the largest net long position since early August 2011.  It is the sixth consecutive week net longs were grown.  Longs positions rose by 11k contracts, while shorts were trimmed by less than 300 contracts.

Lastly, we took a quick look at the oil futures.  Net longs stand at 254.6k contracts, which is the largest since last April.  Longs added 27.2k contracts to stand at almost 395k futures contracts.    Shorts added too, but less than 1000 contracts and are just above 140k contracts.