Speculators Trim Euro And Yen Exposure Ahead Of FOMC And BOJ

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Includes: FXA, FXB, FXC, FXE, FXY, IEF, OIL
by: Marc Chandler

Summary

The speculative gross positioning is often more revealing than net positions, which are traditionally the focus.

Gross long Aussie futures position now is larger than the gross long euro or yen future. New longs may be vulnerable.

Bulls and bears moved to the sidelines in euro, yen and US 10-yr Treasury note futures.

Speculators in the futures market made mostly small position adjustments in the sessions leading up to the FOMC and BOJ meetings. During the Commitment of Traders reporting week ending April 26, the largest adjustment of speculative position in the currency futures was the 12.5 k build of gross long Australian dollar contracts.

The accumulation lifted the gross position to 110.0k contracts, which surpasses the speculative gross long euro position (99.1k contracts) and the speculative gross long yen position (97.5k contracts). The conventional focus on net positions would not pick-up on this, yet it is the gross exposure that depicts the vulnerability to an adverse move.

There were no other gross currency position adjustments of more than 10k contracts. However, there were a couple of gross position changes that approached this threshold. The bears covered 9.4k short euro dollar contracts, leaving 138.7k. The gross long Mexican peso position was cut by 20% or 9.3k contracts to 34.6k.

Besides the relatively small position adjustment, there does not appear to be an overall pattern. It is notable though that speculators reduced euro and yen exposures. Gross longs and gross shorts were reduced. This produced a reduction of the net short speculative euro position to 39.7k contracts from 46.9k. The net long yen position was slipped to 66.5k contracts from 71.9k.

Given the subsequent spot price action, it ought not be surprising to see that new speculative long euro and yen positions have been established. The new long Australian dollar futures are in weak hands. Since the reporting period ended, speculation of an RBA rate cut has increased, and this has weighed on the Aussie in the spot market.

Speculators cut their exposure to the US 10-year Treasury note in the five sessions before the conclusion of the FOMC meeting. In each of those five sessions, the price of the note futures fell (yields rose). The bulls slashed 57.1k contracts of their gross long position, leaving them with 422.9k contracts. The bears took covered 17.6k short contracts, giving them 486.7k. The net short position swelled to 63.8k contracts from 24.3k.

In the oil futures, the bulls and bears were equally active. The bulls bought 4.2k contracts to lift the gross long position to 544.3k contracts. The bears added 4.1k contracts to their gross short position, which now stands at 210.0 contracts. The net long position rose a hundred contracts to 334.3k.

26-Apr

Commitment of Traders

Net

Prior

Gross Long

Change

Gross Short

Change

Euro

-39.7

-46.9

99.1

-2.1

138.7

-9.4

Yen

66.5

71.9

97.5

-8.2

31.0

-2.9

Sterling

-47.5

-55.2

40.4

7.7

89.1

1.2

Swiss Franc

9.3

9.4

24.4

4.1

14.7

4.3

C$

12.0

7.3

37,1

4.6

25.1

-0.1

A$

59.5

44.1

110.0

12.5

50.4

-3.0

NZ$

7.4

5.4

24.5

1.8

17.1

-0.2

Mexican Peso

-19.3

-14.4

34.6

-9.3

53.9

-4.4

(CFTC, Bloomberg) Speculative positions in 000's of contracts

Click to enlarge

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.