- Euro short not big, but most extreme since early 2017
- Aussie short sits near record extreme, but could change
- Gold positioning and volatility hanging out around 20-year extreme
For a timelier look at sentiment in major currencies and markets, see the IG Client Sentiment page.
The most recent report didn’t show anything earth-shattering in terms of one-week changes. It was generally more of the same; USD bullishness persists, and against some currencies to a degree matching long-term extremes. Conviction in gold is hard to find in a historically lackluster trading environment, but maybe that can change here at some point soon.
On Fridays the CFTC releases a detailed report of traders’ positioning in the futures market as reported for the week ending on Tuesday. Outlined in the table below are key stats concerning the positioning of large speculators (i.e. hedge funds, CTAs, etc.), excluding small speculators and commercial traders.
‘Large specs’ are known to typically employ trend-following strategies, and as such, they tend to add to long positions and reduce shorts in uptrends while reducing long positions and increasing shorts in downtrends. When analyzing the data, we take into consideration the direction of their position, magnitude of changes, as well as extremes.
Key stats: Net position, one-week change, and where the current position stands relative to the past 52 weeks.
Euro short not big, but most extreme since early 2017
Last week, large speculators added another 2.4k contracts to their existing net-short positioning of 32.6k. While not a historical extreme, it is the shortest this group of trend-following traders has been since March 2017. What makes this year’s move an extreme, though, is that just in February large specs held a record long of over 150k contracts. However, it is possible the flip to short is just beginning to gain traction as it is still a long way away from the short positioning extremes seen in 2015 and 2016. The Euro generally remains a difficult handle…
EUR/USD Positioning Chart
Aussie short sits near record extreme, but could change
AUD speculators have been persistently short and right about their bets as Aussie has been one of the most consistent trends in all of FX in this, and this is certainly the case in the major currencies. At over 70k contracts short, large specs are holding positioning rivaling extremes seen during 2013 and 2015. Each of the times before when positioning reached this big of an extreme there was at the least a corrective move higher. With AUD/USD having finally broke an important trend-line last week the corrective move higher may indeed begin to grow legs for a little while at least.
AUD/USD Positioning Chart
Gold positioning and volatility hanging out around 20-year extremes
Gold remains a weird market, with volatility at extremely low levels as market participants don’t seem to know what to do with the precious metal. 52-week historical volatility is just over 8, levels not seen since the '90s. This is unsustainable, but it is difficult to say what will spring gold free.
On the positioning front, large specs are net-long again after holding the first net-short since 2001. Positioning and volatility have both been at an extreme on a relative basis for the former and actual on the latter, perhaps this mixture will lead to an end to the low volatility stifling traders.
Gold positioning & volatility chart
See what fundamental and technical drivers are at work in the Q4 Trading Forecasts.
Large speculator profiles for major FX & markets:
US Dollar Index (DXY)
New Zealand Dollar
S&P 500 (E-mini)
Resources for Forex & CFD Traders
Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX