COT: JPY and VIX bought during week of trade turmoil
Head of Commodity Strategy
Summary: The non-commercial dollar long against ten IMM currency futures saw a small reduction from the highest level since December 2015. The $0.6bn reduction to $34.5bn was driven by an 8% reduction in the JPY short on renewed trade war concerns and falling equities.
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The euro net-short meanwhile expanded by 561 lots to 106k lots, the highest since December 2016.
Combined dollar position against ten IMM currency futures;
In fixed income leveraged funds kept up the selling pressure in 2’s with the net-short reaching a fresh record while selling of 10’s were being offset by buying of T-bonds
The Cboe VIX received a great deal of attention as it surged in response to renewed stock market weakness. Especially the record short raised concerns about a February 2018 style blowout. In the end the weakness in stocks were orderly and so was the reduction of short VIX positions which up until last Tuesday was cut by 30k lots to 150k lots.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.
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