FX Spec Positioning Hits Multi-Year Extremes As Dollar Tumbles, Euro Soars

Following the latest weekly battering of the USD, which has tumbled to near one year lows, the latest CFTC net spec positioning (which traditionally represents a lagging picture of price trend and has very limited, if any, informational value) saw a continuation of recent extreme moves, nowhere more so than in Euro and Japanese Yen net spec positions, which have shifted to most long since late 2013, and most short since January 2014 respectively.

A quick summary of the latest FX CFTC net exposure via DB reveals that specs turned net long in CAD futures by 8K contracts for the first time since mid-March, buying over 16K contracts over the week.

They continued to pare their net shorts in GBP by 8K contracts to 16K contracts for the third week in a row.

In the meantime, they increased their net shorts in JPY for the fourth straight week to 127K contracts, the highest since January 2014...

... but the most notable move was the surge in net EUR bullish spec positioning, which has surpassed the previous high seen in 2013.  According to JPM, this recent position build up is less likely to have been driven by CTAs, as in the bank's trend following strategies framework, trend following signals turned long the euro some time ago in May. So the most recent positioning build is more likely to have driven by discretionary managers, including currency hedge funds which up until June appear to have missed out on the EUR rally.

This is shown in Figure 10, which depicts the performance of Currency HFs using the HFRI Monthly Currency HF Index and compares it with the performance of JPM’s EUR tradable index. Figure 10 implies that Currency HFs were short the euro (i.e. their performance was negative related to that of the euro) during January and February this year but they had shifted to a pretty long position in the euro in April and May. They appear to have taken profit in June missing out on the euro rise. The fact that Currency HFs had missed out on the euro’s rise in June, makes them a good candidate in them catching up in July, thus explaining the positioning build up revealed by CFTC data.

Finally, as a result of the ongoing rout in the USD, the net spec positioning in the greenback now the shortest since mid-2014:

Zoomed in and broken down by offseting FX pair:

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Aside from FX, there was several notable trends in the rates complex, where net spec positioning in TSY futs decreased for the third straight week by 32K contracts in TY equivalents to -120K contracts.

As Deutsche Bank notes, the largest sales came in TU where specs resumed adding to their net shorts by 17K contracts after a pause in the previous week – their net shorts in TU have increased by 263K contracts since May. They also increased their net shorts in WN by 8K contracts and pared their net longs in TN by a half to 12K contracts. In contrast, specs added 25K contracts to their net longs in TY for the first time in the last four weeks.

After Eurodollars hit record net spec shorts in June, there has been a sharp burst of short covering, and the net short here is now roughly half where it was just one month ago.

Yet while shorts were covered in the ED space, a new record net spec short has emerged in 2Y contracts, which just hit a new all time net short of -274K contracts.

Meanwhile, after the recent fireworks in 10Y nets, which violently moved from a record short to a record long in the span of week, there has been far less movement in recent days, echoing the somewhat more stable price for 10Y futs.

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A quick look at commodities reveals that there was little to note in the latest NYMEX crude move, with money managers increasing their bullish Nymex WTI crude oil bets by 36,834, the highest net-long bullish position in six weeks...

... the aggressive shorting and unwind of long position in precious metals, including gold...

... but especially silver, has accelerated in recent weeks, suggesting the likelihood of a sharp short squeeze is rising.

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Finally, looking at equity positioning, reveals a modest increase of 23K net specs in E-mini futs...

... even as hedge funds continue to unwind net long positioning in the tech-heavy Nasdaq, which has seen the net position roughly flat vs one week ago, and rising by 8K contracts to 39K as of the most recent week.