Speculators Added To Long Position Ahead Of BOJ

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

Summary

Speculators grew their net and gross long yen position leading up to the BOJ meeting.

Spec did not cover short Canadian dollar positions despite the Loonie's surge in the spot market.

Bulls took control again in the US 10-year Tsy note futures.

The latest CFTC Commitment of Traders report covers the five sessions through January 26, the day before the FOMC concluded its two-day meeting and three days before the BOJ's announcement. Speculators hardly changed their positioning during the period. There was no gross position adjustments that we call significant, a bar we set at 10k contracts.

Indeed, in the most recent reporting period, there were only four gross position changes larger than 5k contracts. The bears added 5.8k and 5.2k contracts to the gross short positions of sterling and the Swiss franc respectively. This was sufficient to swing the net franc position short (-4.5k contracts) for the first time since mid-December.

With the help of a small (3.2k contracts) liquidation of gross long positions, the net speculative short sterling position rose to 47.5k. This is the largest since August 2013.

In the case of the euro and yen, the bears reduced their gross short positions. Approximately 7.8k short euro contracts were covered, leaving the gross short position at 198.7k, easily the largest short position in the currency futures.

The gross short yen position was shaved by 4.2k contracts to 42.6k. Of note, the gross longs increased by 8.1k contracts. The 92.6k contracts is the largest gross long position in the currency futures. The speculators appear to have been caught leaning the wrong way on the BOJ's surprise. The scrambling of players may have contributed to the sharp yen rise in response though a 20 bp cut in the rate on some excess reserves and introducing a negative rate for the first time would have likely elicited a strong response however speculators were positioned.

The gross positions in the Canadian dollar changed by less than five hundred contracts. This may not sound particularly interesting, but it is revealing. The Canadian dollar has appreciated by about 5% since January 20, and speculators have not cut their gross shorts over the past two weeks.

Speculators swung their net position in the US 10-year Treasury note futures by a 112k contracts to long 44.5k contracts. In the latest reporting period, the bulls added 83k contracts to their gross long position to 496.4k contracts. It is the biggest increase in six months. The shorts covered 29.3k contracts, leaving the gross short position at 451.9k contracts. The note futures staged a strong rally in response to the BOJ's move.

The net speculative long light sweet crude oil futures rose by 26.3k contracts to 205.7k. The gross longs added 40.9k contracts, giving the bulls 523.7k contracts. The increase in the gross longs over the past four weeks is the largest since they tried picking a bottom a year ago. The bears sold into the advance and added 14.6k contracts to their short position, bringing it to 318k contracts.

26-Jan

Commitment of Traders

Net

Prior

Gross Long

Change

Gross Short

Change

Euro

-127.0

-137.0

71.4

2.0

198.7

-7.8

Yen

50.0

37.7

92.6

8.1

42.6

-4.2

Sterling

-47.5

-38.6

34.7

-3.2

82.2

5.8

Swiss Franc

-4.5

0.9

24.9

-0.3

29.4

5.2

C$

-66.8

-66.4

32.8

-0.3

99.6

0.1

A$

-32.8

-36.3

46.3

0.8

79.1

-2.7

NZ$

-5.4

-3.0

15.2

0.2

20.6

2.7

Mexican Peso

-76.6

-76.0

28.5

-1.9

105.1

-1.3

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

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.