The latest week was marked by liquidation of futures as the June contract expired. The total reduction in the futures and delta-adjusted option positions was almost 350K contracts. In the process, the long USD position was reduced to 285K contracts; this reduction takes the USD long to the smallest since the report of May 22nd.
The largest currency futures market is the euro and that is where there was the largest reduction in the OI. The spec short position was reduced to 176K, from the previous week's 235K.
It is interesting to note that part of the net short reduction was caused by the purchases on 15.2K of new longs by the large specs. Large specs remain a 3.5 to 1 short in the euro versus the USD.
There was a sizable drop in the short positions in the SF, down to 22.3K from the previous week's 53K. Could this activity be in any way related to the SNB peg with the euro?
Looking at the COT long form of futures and options in the Japanese yen, we find the commercial is less than 150 contracts from being even. There is a major disagreement, however, among the specs. The small spec has a 16K short and the larg spec, about a 16K yen long. Last week the small spec was right but today, the large spec is a winner.
- US Dollar Index: Liquidation of the June contract did little to change the composition of the market. The large trader dominates this market and is a 7.5 ratio long. Small specs have only a minor involvement in th DI market and are a 4.8 to 1 long.
- Euro (EUR/USD): Speculators reduced their short positions in the euro by about 49K contracts. Most of the position change involved the large spec who was a buyer of 14.8K contracts and reduced his short by 40.5K contracts. He remains a 4.5 ratio short. There was a 34K reduction in hedging which is mostly the expiration of option contracts. The open interest, though reduced because on contract expiration remains quite large at 361K contracts.
- British Pound Sterling (GBP/USD): Speculators reduced some of their positions but remain very modest shorts in the pound. The total short position is less than 29K.
- Japanese Yen (JPY/USD): Commercials are practically even with their yen positions. This means that the large specs, who are long the yen, and the small specs, have short positions that nearly off set the large trader longs. Until today recent market action had favored those short the yen.
- Swiss Franc (CHF/USD): There was a very large 36.1K reduction in the SF OI. This was mostly the result of the commercials reducing their long by 36.3K and their short by 5.5K, and by a 18.4 reduction in SF spreading. Small spec held most of their short Francs and remain about a 3 to 1 short.
- Canadian Dollar (CAD/USD): Despite expiration of the June contract, there was very little change in the composition of the CAD. Both spec groups are token longs in the C$ and the total long changed very little in the last period.
- New Zealand Dollar (NZD/USD): Over 50% of the total OI was liquidated with the expiration of the June contract. The amount remaining open is very small, only 12.6K, and there seems to be little consensus of the next move.
- Australian Dollar (AUD/USD): The big short interest in the AUD was liquidated taking the total short down to 12.2K from 59.8 in the previous period. As we mentioned, the strong rally was likely to result in a short covering rally. Although the total OI remains large, there is little consensus about the market's direction. Specs are cautiously short small amounts of the AUD.