Speculators Slash Yen and Aussie Longs

There were only two significant speculative position adjustments in the latest CFTC reporting week ending May 24. Speculators liquidated 31.4k gross long yen contracts, leaving the bulls with 54.8k contracts. It is the largest weekly adjustment since last September.

Speculators have not been particularly keen to pick a yen top. The gross short position rose by 5.5k contracts to 32.7k, and only 2k contracts on the month, while the yen has weakened 3.5% in the spot market

Speculators also slashed their gross long Australian dollar position by 20.1k contracts to bring the position to 51.7k contracts. It is the fourth consecutive week that speculators have culled their longs by more than 10k contracts, our threshold for "significant" adjustments. Over the course of the four weeks, the gross long position has been halved.

The bears have not been making much of a stand. The gross short position increased by 4.7k contracts and is up about 7k contracts over the past two reporting periods while the gross longs have been cut by 31k contracts at the same time.

Outside of the Australian dollar and yen, the only other currency futures that saw speculators shift gross positions by more than 5k contracts was the euro. The gross longs were trimmed by 7.8k contracts to 94k, which is the smallest speculative gross long position in seven weeks. It actually peaked in early February a little more than 114k contracts, but it has been steady and was at 113k contracts at the start of the month. Speculators added 7.5k contracts to their gross short euro position, lifting it to 131.9k contracts. It has increased slightly for the second consecutive reporting period, but outside of this month, the gross short position is the smallest since July 2014.

There did not appear to be an overall pattern in the gross position adjustments, but the net speculative positions were all adjusted toward a less negative or more positive dollar exposure. The only exception was sterling where the net short position fell (smaller long dollar) slipped to 32.8k contracts from 38.6k. This was mostly a function of short covering (-4.6k) than accumulating longs (+1.0k).

Speculators had added 61k 10-year Treasury futures contracts to their gross short position in the previous reporting period. It seems as if the lack of follow through selling, or the flat price action, frustrated or bored the new shorts. In the reporting period ending May 23, the shorts covered 26.4k contracts (leaving them with 544.5k). It was not as if bottom pickers emerged. There were 5.7k contracts added to the gross long position (lifting it to 464.2k contracts). The net short position fell to 80.3k from 112.3k contracts.

As the $50 a barrel level of oil was approached, speculators took profits on 26.4k contracts, which took the gross long position to 528.2k contracts. Some shorts capitulated and covered 5.7k contracts, reducing the gross short position to 180.1k contracts. These adjustments resulted in a 20.6k contract reduction in the net long position, which now stands at 348.1k contracts.

24-May		Commitment of Traders
	Net	Prior	Gross Long	Change	Gross Short	Change
Euro	-37.9	-22.6	94.0	-7.8	131.9	7.5
Yen	22.1	58.9	54.8	-31.4	32.7	5.5
Sterling	-32.8	-38.4	38.6	1.0	71.4	-4.6
Swiss Franc	4.0	4.1	24.9	2.4	20.9	2.6
C$	20.0	22.7	32.8	-4.2	12.8	-1.5
A$	0.1	24.9	51.7	-20.1	51.6	4.7
NZ$	4.6	6.7	30.4	-2.1	25.8	0.0
Mexican Peso	-47.5	-45.7	27.0	1.8	74.5	3.6
(CFTC, Bloomberg) Speculative positions in 000's of contracts