What’s inside:
- Euro large specs increase net long towards record long
- Canadian dollar net position among large specs flips to net long for first time since mid-March
- Large silver traders take net long down to smallest in nearly a year; a flip short at long-term trend-line could be timely contrarian indicator
Check out the Q3 Forecasts for our outlook on currencies, commodities, and equity indices.
Every Friday the Commitment of Traders (COT) report is released, showing futures traders’ positioning as it stands for the week ending on Tuesday. In the table below are the net positions of large speculators (i.e. hedge funds, CTAs, etc.); the change in their positioning from the prior week and where the net position stands relative to its 52-week range.
Notable developments
Euro – Large speculators continue to add to their net long exposure, building towards the largest position since May 2011. The largest net long on record was recorded in 2007 at over 119k contracts. Overall, their position since flipping long back on the week of May 12 has been quite profitable with the euro gaining over 8 big-figures since. We noted back then the strong track record of the trend-following crowd and their ability historically to correctly identify trends in the single-currency. However, with the euro coming up on resistance and price becoming stretched, the recent build towards a record long may indicate in the not-too-distant future the trend in the euro is set to pause at the least, if not have a material reversal. Price action isn’t suggesting this to be the case just yet, but conditions are ripe for such an occurrence.
Canadian dollar – Back in early May when we looked at the record short position held by large specs we said, “It’s an extreme which suggests the trend may be saturated and ripe for a reversal.” Since then CAD has turned aggressively higher versus USD and with it the market has been covering their record short at a feverish pace. As of last week, the net position flipped to net long for the first time since March. Perhaps this won’t turn out to have been the timeliest flip given how far CAD has rallied and resistance not far ahead.
Silver – No other market has seen a bigger relative unwinding than the one in progress in the silver futures market. The decline since April spurred large speculators to take their net position down from a record 103k contracts to only 9k. It’s the smallest long position in nearly a year, and while we haven’t seen a net short position since as far back as April 2003, with more pressure on the precious metal we could get there in the not-too-distance future. With a 14-year trend-line not far below, a flip to net short after unwinding an enormous long position may present a timely contrarian indicator.
The COT report is a longer-term sentiment indicator – for a short-term view on sentiment, check out IG Client Sentiment data.
Other futures contracts and large speculator positioning:
Paul conducts webinars every week from Tuesday-Friday. See the Webinar Calendar for details, and the full line-up of all upcoming live events.
---Written by Paul Robinson, Market Analyst
You can receive Paul’s analysis directly via email by signing up here.
You can follow Paul on Twitter at @PaulRobinonFX.
