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Two significant position adjustment in the CFTC reporting - BBH

FXStreet (Bali) - Marc Chandler, Global Head of Currency Strategy at BBH, shares his latest observations based on speculative positioning in the futures market, noting that there were two significant (10k+ contract change in gross positions) position adjustment in the CFTC reporting.

Key Quotes

"There were two significant (10k+ contract change in gross positions) position adjustment in the CFTC reporting period ending September 9. First, short-covering reduced the gross short yen position by 14.8k contracts to 118.0k. The yen has continued to sell-off and new shorts were likely established since the reporting period ended. Second, the bulls went shopping in sterling. They extended the gross long position by 13.8k contracts to 81.3k. It was the most buying in five months. It is also larger than the euro, yen and Swiss franc gross positions combined."

"The other twelve gross currency positions we track were adjusted by less than 5k contracts. Generally speaking, this reflected the position squaring in the sense that most of the currency futures (but the Swiss franc and the Australian dollar) saw a small reduction in gross short positions. Outside of sterling that we discussed above, there was virtually now buying of the currency futures during the reporting period. Combined the euro, yen, and Swiss franc saw an increase of 2.5k gross long contracts. Gross longs were reduced in Canadian and Australian dollars and the Mexican peso. The out-sized losses in these currencies in recent says suggests were longs have been liquidated."

"Speculators in the US 10-year Treasury futures bought into the decline through September 9. During the week they added almost 58k long contracts for a gross position of 440.2k contracts. The gross shorts edged a little higher. The 8.4k contract increase brings the gross short position to 473.5k contracts. The net short position fell to 33.3k contracts from 82.7k. An important question is when will the longs capitulate? We think that the yields are a little more than half way to what may be a new equilibrium (~2.75%). "

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