Some Thoughts on Current FX Positioning

Every now and then, we find it helpful to take a look at the CFTC Commitment of Traders report. Here, we focus on non-commercial positions up to the week ended June 16. While this data represents a small slice of the speculative community, it does provide a window into market positioning.

SUMMARY

Bullish dollar bets built up in late 2019 and early 2020. Given the Fed’s aggressive easing measures taken since March, the market has since pared back those bullish dollar bets. Net long positioning in the dollar bloc currencies have increased but do not appear to be stretched. Sterling and Mexican peso positioning also do not appear to be stretched right now. On the other hand, euro and yen positioning have gotten a bit stretched, suggesting further gains may be difficult for these two near-term.

 

AMERICAS
CAD: Net Loonie shorts of -25k contracts remain near the mid-May peak near -35k. Net longs peaked at 54k in early November, but the market moved to being net short by mid-March. This movement was driven largely by a drop in gross long positions. Current CAD positioning does not seem stretched and so further gains appear likely.

MXN: Net peso longs of 22k contracts is the highest since mid-March. Net longs peaked at 170k in late January, but the market moved quickly to single-digits by early April. This movement was driven largely by a drop in gross long positions. The market moved to being net short by mid-April but has since moved back to small net long, driven largely by a modest recovery in gross long positions. Current MXN positioning does not seem stretched and so further gains appear likely.

EUROPE/MIDDLE EAST/AFRICA

EUR: Net euro longs of 117k contracts is the highest since May 2018. Net shorts peaked at -114k in late February and the market quickly moved to being net long by mid-March. This movement was driven largely by a drop in gross short positions. Current EUR positioning seems stretched and so further gains may be difficult near-term.

GBP: Net sterling shorts of -16k contracts is the lowest since mid-May. Net longs peaked at 35k in early March and the market moved to being net short by mid-April. This movement was driven largely by a rise in gross short positions. Current GBP positioning does not seem stretched and so further gains appear likely.

ASIA

JPY: Net yen longs of 22k contracts is down from the peak of 35k in late May but still in rare positive territory. Net shorts peaked at -56k in late February and the market quickly moved to being net long by early April. This movement was driven largely by a drop in gross long positions. Current JPY positioning seems a bit stretched by historical standards and so further gains may be difficult near-term.

AUD: Net Aussie shorts of -6.5k contracts is the lowest since May 2018. This movement was driven largely by a drop in gross short positions. The market has not been net long since March 2018. Current AUD positioning does not seem stretched and so further gains appear likely.

NZD: Net Kiwi shorts of -2k contracts is the lowest since early February. This movement was driven largely by a drop in gross short positions. Markey went net long briefly in late January. Current NZD positioning does not seem stretched and so further gains appear likely.