Speculators Cut Currency Exposure Ahead Of FOMC, BOJ, And Brexit

| About: CurrencyShares Euro (FXE)

Summary

Speculators slashed gross long sterling positions ahead of the referendum.

The bulls made a strong stand in the US 10-year Treasury futures.

The bears showed their paws in the Canadian dollar.

The CFTC reporting week ending June 21 covers the day FOMC and BOJ meetings and ends two days before the UK referendum. The overarching theme was the reduction of exposure. This is not measured by net positions but by gross positions.

Of the eight currencies we track, six saw a reduction of gross long positions and a six saw a reduction in the gross short positions. Five of the eight currencies showed a decline in both long and short positions.

There were four significant (more than 10k contracts) gross currency adjustments. The euro accounts for half. The gross long position was cut by 15.9k contracts, leaving the bulls with 88.6k contracts. The gross short position was chopped by 11k contracts to 150k.

The gross long sterling position got culled by a third or 20k contracts to 41.7k Recall that in the previous week, 25.4k contracts were added to the gross long position. The gross short position was trimmed by 4.7k contracts, leaving 93.7k contracts, which is among the largest short positions on record. On a net basis, large speculators were short 51.9k sterling contracts. Any gross long contract that had a stop associated with it was likely stopped out.

The final currency that had a significant adjustment was the Canadian dollar as the bears increased their gross short position by more than half. The 14.1k contract increase lifts the gross short position to 38.1k contracts. It was the increase in the gross short position that is behind the fall in the net long position (to 2.6k contracts from 18.4k) rather than liquidation of longs (-1.7k to 40.7k contracts)

The bulls charged ahead in the US 10-year Treasury note futures market. They expanded the gross long position by 110.6k contracts to 711.5k. It is the largest position since late-2007. It is the third week of strong gains. Three weeks ago, the gross long position stood at 404.6k contracts. The bears added 41k contracts to the gross short position, which now stands at 596.8k contracts.

The bulls and bears moved to the sidelines in the most recent reporting period. The bulls trimmed 8.1k contracts (to 515.2k) and the bears covered 14.1k contracts (to 196.6k). Ironically, the result of these gross adjustments, the net speculative position increased by 6k contracts to 318.6k.

21-Jun

Commitment of Traders

Net

Prior

Gross Long

Change

Gross Short

Change

Euro

-61.3

-56.5

88.6

-15.9

150.0

-11.0

Yen

52.3

55.7

79.4

1.7

27.1

5.1

Sterling

-51.9

-36.7

41.7

-20.0

93.7

-4.7

Swiss Franc

6.4

7.1

24.0

-4.5

17.6

-3.7

C$

2.6

18.4

40.7

-1.7

38.1

14.1

A$

-7.0

-6.8

38.6

-0.9

45.7

-0.6

NZ$

-3.0

-3.8

30.0

0.4

33.1

-0.3

Mexican Peso

-68.9

-65.6

13.5

-3.4

82.4

-0.1

(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.