Market Analysis

Back To The Futures

Traders and analysts alike scrutinize data from the US’ Commodities Futures Trading Commission (CFTC) as an indicator of broader market sentiment. And while it should always be noted that the data, released on a Friday, always refers to the state of play as at the close of business on the previous Tuesday, the numbers are closely followed. Data released on Friday for the week ending July 18 showed net positions held by International Monetary Market (IMM) participants in the yen (USDJPY), euro (EURUSD), sterling (GBPUSD), Swiss franc (USDCHF), and Australian and Canadian dollars (AUDUSD, USDCAD) produced an overall net short position in the US dollar of $1.91 billion. As Reuters noted that represents the largest net short US dollar position since May 2016.  In fact, again as Reuters points out, “in a wider measure of US dollar positioning that includes net futures contracts in the New Zealand dollar (NZDUSD), the Mexican peso (USDMXN), the Brazilian real (USDBRL) and the Russian rouble (USDRUB), the US dollar posted a net short position valued at $7.67 billion, the largest since February 2013. And let’s not forget that CFTC data precedes the upward move in the euro following last Thursday’s ECB meeting. Traders should also note that if the yen position was backed out of the net figure, the net US dollar short would be even greater as IMM traders continue to run short yen. “Bearish positioning [in the yen] widened $1.9bn [week on week] to $14.1bn on the back of a sizeable build in gross [yen] shorts ($1.6bn) and modest covering of [yen] longs ($0.3bn),” Canada’s Scotiabank wrote. The CFTC data shows the net yen short position at its largest since January 2014. But what can traders make of all this?  It’s a matter of opinion, of course. Some traders will conclude that the data shows that the momentum behind the lower US dollar, and the popularity of the yen short play, is sustained by the evidence of the CFTC data. Others might conclude that both trades have become inherently crowded. But traders can only make such calculations if they look at what the CFTC data shows. Keeping an eye on what the CFTC publishes each Friday can prove informative.

Written by Neal Kimberley, External Currency Analyst.