Wednesday, 20 March 2013

Speculators Continue to Make Large USD Purchases

CFTC Commitments of Traders (COT) Report 12 March, published 15 March 2013 - Technical Analysis. Speculators actively sold the yen, the British pound and the Canadian Dollar.  They also modestly increased their shorts in the euro and the SF.  Adding the continued spec buying in the DI, the total USD long expanded to 330,130 contracts.  This is the largest USD long since June of 2012 when the long went up to over 440K.

Excel Markets Trading Contest - All Cash PrizesWe are approaching the end of trading in the March contract.  It is customary for there to be a large expansion of the OI in this period.  Often, the biggest increase in the OI is in the C$.  We suspect some of the large activity in the C$ is related to pricing of industrial or financial contract, but cannot prove our suspicions.

What is surprising about this expiration is the extremely large OI in the pound.  The total 318K open is the largest trade of any of the currencies except the yen.  Since the beginning of 2013, the pound has been in a big bear move from 1.63 to under 1.49, and the specs have sold all the way down.  This market could be ripe for a short squeeze.  This is a market rally that feeds on itself as shorts cover their positions.
  • US Dollar Index: The DI contract continues to be dominated by the large spec.  In the latest period, he reduced his shorts by 4.5Kcontracts and increased his longs a modest 1.7K.  The small spec made small additions to his 4.0 ratio long.
  • Euro (EUR/USD):  The euro is the only contract we reviewed that reported a decrease in the open interest, and the decrease was large - over 14% of the total.  Spreading which includes the option trade showed a 16.6K decrease because of expiring option.  Other reductions in the OI occurred on both long and short sides of commercials as well as both sized specs.  For some reason, everyone was getting out of the euro.  The remaining OI was less than that in the yen, pound, and even the C$.  The specs are now short a total of 34.1K contracts.
  • British Pound Sterling (GBP/USD):  The size of the OI in the pound has been growing at an extremely fast pace, and was up 15.5% to a total of 318K.  In this period, most of the increase was by commercials who increased both longs and shorts.  The total spec short position increased to 79.4K.  Large specs are a 2.6 and the small specs a 2.2 ratio short.
  • Japanese Yen (JPY/USD):  The short yen remains a very popular short position for the specs.  The large short is a 2.7 ratio short and the small spec a 2.5 short.  The total short position is a hefty 131K contracts. Spreading which for the most part is option trade is a very large 12.4% of the OI.
  • Swiss Franc (CHF/USD):  The OI made a large gain, 18% in this period.  Most of the increase was caused by speculative short selling in the Swissie.  Specs are now short 26.2K contracts, up from 18K last week.
  • Canadian Dollar (CAD/USD):  The OI continues to climb as we approach the end of trading in the March contract.  The large specs have moved to the short side of the C$ a few weeks ago and they are now a 2.4 ratio short.  Big commercial activity at the expiration of a futures contract is normal.  We guess this is for commercial pricing of export trade between Canada and the US.
  • New Zealand Dollar (NZD/USD):  Speculators stubbornly cling to their long positions in the NZ$.  Large specs are almost a 5 to 1 long in the Kiwi, and despite acknowledgment by the NZ Central banker that they are not happy with what they consider is an overpriced currency, they keep the long.  Did the sell-off down to .82 take some of these longs out? 
  • Australian Dollar (AUD/USD):  There was a wave of speculative buying in the A$ during the period.  The total spec position flipped from a very small short to long of 23.2K.  The OI increased about 9% during the period.  It looks like most of the acquisition of the new longs was under the current trade level of 1.0370. 
Currency Commitments of Traders with Delta-adjusted Options and Futures Combined,
data through March 12, 2013
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: 80,300 61,630 29,896 7,834 2,023 7,742 45,287
Change: 872 1,672 -4,453 644 261 -1,666 4,842
 % Open Interest:
76.7 37.2 9.8 2.5 9.6 56.4
Euro (EUR/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 252,511 57,413 80,537 48,398 59,375 114,350 80,248
Change: -35,535 -5,930 -1,341 -1,757 -1,118 -11,339 -16,567
 % Open Interest:
22.7 31.9 19.2 23.5 45.3 31.8
British Pound Sterling (GBP/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 318,018 30,032 78,632 24,064 54,853 238,619 159,230
Change: 49,371 -6,540 4,172 1,192 -3,031 50,759 44,271
 % Open Interest:
9.4 24.7 7.6 17.2 75.0 50.1
Japanese Yen (JPY/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 329,740 53,438 143,505 24,690 65,569 210,684 79,738
Change: 22,367 3,944 25,274 1,397 2,497 17,892 -4,538
 % Open Interest:
16.2 43.5 7.5 19.9 63.9 24.2
Swiss Franc (CHF/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 70,797 6,095 19,694 10,633 23,230 47,526 21,329
Change: 12,939 -849 1,152 -1,393 4,818 10,379 2,166
 % Open Interest:
8.6 27.8 15.0 32.8 67.1 30.1
Canadian Dollar (CAD/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 260,527 37,341 90,318 29,660 42,306 185,646 120,024
Change: 14,632 -3,889 4,883 -3,573 -141 26,091 13,888
 % Open Interest:
14.3 34.7 11.4 16.2 71.3 46.1
New Zealand Dollar (NZD/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 32,813 24,250 4,900 3,832 2,751 3,591 24,022
Change: 1,265 438 132 -177 47 199 281
 % Open Interest:
73.9 14.9 11.7 8.4 10.9 73.2
Australian Dollar (AUD/USD)
(1) Large Traders (2) Small Traders (3) Commercial
Open Interest Long Short Long Short Long Short
Contracts: 195,654 76,843 53,381 28,806 29,029 81,178 104,418
Change: 18,213 16,993 -1,985 3,654 -871 235 23,737
 % Open Interest:
39.3 27.3 14.7 14.8 41.5 53.4

To view the COT report data released by the CFTC, please see the attached files:
Cotton No. 2 - ICE Futures USD and Butter (Cash Settled) - CME

For general information about the COT report please see the article The CFTC Commitments of Traders Report.
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