Last week we reported the total position of speculators flipped to the long side of the USD for the first time since the Novermber 27, 2012 report. The USD long from last week, 30,552 contracts, grew sharply to 178,781 of various USD long positions. This is the largest long USD position specs have held since the July 24 report in 2012.
The big shift was in the commodity currencies. Going back to our COT report of Feb 5, 2013 we observed:
For the past several months it has been very popular to be long commodity currencies and short the USD. Combined long positions of the Australian Canadian, and New Zealand Dollars exceeded 230K contracts in three separate periods. This position has been reduced to only 158K contracts, though almost all of the reduction has come in the Canadian Dollar. Judging from market action since the close of the report there is more C$, and probably A$ liquidation.
Indeed, there has been liquidation in these currencies. The most recent report shows the speculative long in the commodity currencies is down to only 14,831 contracts.
For the first time in months, the sentiment in the heavily-traded euro has shifted and they are now short the single currency. It was early January 2013, the last time specs were short the euro.
The big short in the Japanese yen remain for the most part. Recently, it looks like some of the currency warriors have been attacking the British pound. There the net short sutures position has increased to 57.6K contracts.
- US Dollar Index: The open interest (OI) surged upward by almost 20K as specs aggressively bought the DI. The net spec long position increased from 15.2K to 27K. Most of the trade in the DI is done by large specs, but the small specs do have a 4 ratio long.
- Euro (EUR/USD): The combined OI for futures and delta-adjusted opens increased to 301K, while the OI for futures alone is only 230.6K contracts. This illustrates the immense trade in the euro options. Large specs increased their short position by 20.3K contracts and decreased their longs by 5K contracts, and in the process flipped to the short side of the euro. Small specs remain long the euro. Judging by market action since the report's end, there has probably been more euro selling.
- British Pound Sterling (GBP/USD): The open interest in the pound continued to build as specs sold the pound. The total net short spec position was up to 57.5K from last period's 40.8K. Specs of both sizes are better than a 2 ratio short.
- Japanese Yen (JPY/USD): The big spec short in the yen remains but the OI was reduced a small amount as was the big short position. There is a large option trade in the yen. The combined futures and delta-adjusted option OI is 281.£K. Exclude options, and the OI is only 216.3K. Small specs are about a 3 ratio short and the large specs a 2.3-to-1 short. We wonder if the holders of some of these shorts are not tiring because there is little progress in the bear market.
- Swiss Franc (CHF/USD): The total net spec position moved to the short side of the SF despite neither the big or little guys flipped positions. The position change happened last week when the large spec became a nominal short. He then aggressively sold the SF in the last period and became a 2 ratio short. The small spec clings to a small SF long.
- Canadian Dollar (CAD/USD): The OI increased 48.8K contracts, an exceptionally large change for one week. Both the large and small specs flipped from a long to a short C$ position. The total shift in the specs position was 47.9K in one week. With the big selling in the C$, it is surprising that the C$ only weakened to the 1.03 handle.
- New Zealand Dollar (NZD/USD): Unlike most of the other currencies, there was liquidation in the NZ$. However, the large spec remains a 7 ratio long, perhaps unaware the commodity bubble has been pierced.
- Australian Dollar (AUD/USD): There was big liquidation of short positions in the A$. The total long position in the A$ dropped from 46.2K to 17.8K with the small spec flipping to a short position in the Aussie. The large specs remained long 17.8 contracts but market action since the cut off date acts like he has been a late seller.
