Head of Commodity Strategy
Summary: Hedge funds and other large speculators increased their dollar long against ten IMM currency futures by 22% to $15.5 billion, the highest since June. The change was led by a 38% jump in the EUR net-short to a three-months high and a 27% reduction in the JPY net-long
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
Hedge funds and other large speculators increased their dollar long against ten IMM currency futures by 22% to $15.5 billion, the highest since June. This was the week when the ECB rate cut initially sent the euro lower thereby creating a double bottom in EURUSD at €1.0926 before it settled into a €1.1 to €1.11 range.
The change was led by a 38% jump in the EUR net-short to a three-months high at 69k lots (€8.6 bn) and 27% reduction in the JPY net-long. Noticeable selling was also seen in MXN and not least NZD where the 36k short was the highest on record. The selling of EUR and light buying of GBP moved the Brexit troubled currency up one position and is now the second most shorted currency against the dollar.
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.