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Euro and Pound Remain Currency Specs Favored Short -COT Report 10 4 2011

Currency speculators remain bearish on the future price of the euro and the pound versus the US Dollar.  Specs are now short 107,464  euro contracts, and 88,757 contracts of the pound.  Each euro contract is worth about $167,300, and the pound contract is worth about $96,000.  Specs also are long almost 50K contracts of the Dollar Index.  The only significant USD short position is versus a spec long in the Japanese yen of 37,855 contracts.

        The total net USD long position this week is 212,209 contracts up from 198,397 in the prior week.  The total open interest in the eight contracts reviewed was a big increase, 120,831 contracts.  The big increases were in the pound, the Australian Dollar the Canadian Dollar and the euro.  Much of the increase in the open interest was commercials on both side of the market.

        Usually the large and the small specs are on the same side of the market, once a trend is established.  Currently this is the situation in the DI, the euro and the pound where all parties are short.  Specs are going different ways  in the yen, large specs are long, the Canadian Dollar, large specs are short, the Australian Dollar, large specs are long, and the New Zealand Dollar where the large specs are long.  Large specs are generally the most astute traders, and it is important when they flip from a long to a short or vice verse.

The only large spec group to flip during the week was in the Swiss Franc where he flipped to the short side of the franc.  Does this mean the SNB is going to attempt further weakening in the franc, or is the currency merely going to sink further with the euro?

  • US Dollar Index:The OI in the DI continues to grow as large and small specs add to their longs.  Large specs are now a 5.5 ratio long and the small spec is a 6.3 to 1 long.  Markets when this long are short such a ratio are vulnerable to a reversal with a market surprise.  The total spec long is almost 50K contracts.
  • Euro (EUR/USD):Specs held their positions but did not change the size of their commitment.  The 22.4K increase in the OI was the result of spreading, (option trade,) and an increase in commercials on both sides of the market.  Large specs remain a 5 to 1 short.  The total spec short remained about unchanged at 107.4K.  Spreading, option activity, is a large 16.3% of the total market.
  • British Pound Sterling (GBP/USD):  Trading activity in the pound continues to grow, faster then the news propelling interest in the pound.  The large spec is a 5.4 ratio short and added to the position during the period.  The total spec pound short is 88.8K.  The increase in the OI was caused by option activity and commercials both buying and selling.
  • Japanese Yen (JPY/USD):There was little change in spec positions.  The large spec remains better than a 3 to 1 yen long, and the small spec is short.  The increase in the OI was caused by commercials on both sides of the market
  • Swiss Franc (CHF/USD): The large spec and the commercial both flipped their positions during the week.  Commercials are now long the SF and the large specs are now short, joining the small specs who are already short.  Since the SNB intervention, trading in the franc has diminished.
  • Canadian Dollar (CAD/USD): Trade was without feature during the week.  The increase in the OI was caused by commercials on both sides of the market.  Small specs remain small longs and the large spec is now short.
  • New Zealand Dollar (NZD/USD):Small specs, while not big players in this market, did flip their position from long to short during the week.  The large spec reduced his position, but still remains long this very small market.
  • Australian Dollar (AUD/USD): The 26.2K increase in the OI was the result, primarily, of commercial buying and selling.  Though they are about even they added to both longs and shorts.  The large and small specs are on different sides of the market.  Large specs are long, and added to positions, while the small specs added to his short positions.  It is usually best to follow the large specs.  There is a pick up of option activity which now represents 7.8% of the market.
Currency Commitments of Traders with Delta-adjusted Options and Futures Combined, data through October 4, 2011
US Dollar Index (USD/EUR,JPY,GBP,CAD,CHF,SEK)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 73,277 49,702 9,031 11,044 1,749 11,077 61,043
Change: 3,980 2,262 281 532 -358 1,361 4,232
 % Open Interest:   67.8 12.3 15.1 2.4 15.1 83.3
Euro (EUR/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 294,371 19,707 98,604 39,734 68,301 187,016 79,552
Change: 22,416 -621 -1,367 -140 142 15,000 15,464
 % Open Interest:   6.7 33.5 13.5 23.2 63.5 27.0
British Pound Sterling (GBP/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 193,492 15,728 84,739 12,977 32,723 154,184 65,427
Change: 30,372 1,326 6,483 -1,790 -1,515 24,377 18,945
 % Open Interest:   8.1 43.8 6.7 16.9 79.7 33.8
Japanese Yen (JPY/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 146,847 60,608 18,111 28,444 33,086 52,329 90,184
Change: 8,326 -467 -1,329 -479 1,126 9,324 8,580
 % Open Interest:   41.3 12.3 19.4 22.5 35.6 61.4
Swiss Franc (CHF/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 38,494 3,191 4,796 10,806 12,879 14,841 11,163
Change: 4,355 -1,727 1,462 -408 194 4,682 892
 % Open Interest:   8.3 12.5 28.1 33.5 38.6 29.0
Canadian Dollar (CAD/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 123,238 22,720 37,607 38,960 31,504 54,265 46,834
Change: 22,745 1,293 -3,792 2,460 5,351 16,985 19,179
 % Open Interest:   18.4 30.5 31.6 25.6 44.0 38.0
New Zealand Dollar (NZD/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 26,211 12,929 7,363 1,494 2,668 11,686 16,078
Change: 2,407 -1,546 2,479 -767 669 4,618 -843
 % Open Interest:   49.3 28.1 5.7 10.2 44.6 61.3
Australian Dollar (AUD/USD)
    (1) Large Traders (2) Small Traders (3) Commercial
  Open Interest Long Short Long Short Long Short
Contracts: 120,990 35,452 22,580 18,506 28,537 57,540 60,380
Change: 26,230 6,333 -617 -1,286 4,638 17,461 18,487
 % Open Interest:   29.3 18.7 15.3 23.6 47.6 49.9

To view the COT report released by the CFTC please see the attached file.

For general information about the COT report please see the article The CFTC Commitment of Trader Report
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