ITC – FX spec position: Not buying it

According to the latest CFTC report on IMM positions, there was no overall trend for the US dollar in the week to Tuesday, October 2.

  • EURUSD’s fall from above 1.1800 to 1.1500 in the week covered attracted fresh EUR buying. Shorts were maintained, but the net demand resulted in a reduction in the overall short position by EUR610mn to -EUR10.2bn.
  • Perhaps surprisingly, leveraged players didn’t get sucked in and buy CAD after the apparent Nafta deal announced on Sunday September 30. Instead, they added to their long USDCAD, buying a net USD433mn. This has taken the open position to +USD2.3bn. This would seem to explain why USDCAD failed to decisively break below 1.2800. As the chart below shows, there appears a good relationship between leveraged positioning on the IMM and the level USDCAD is trading at.

  • Both longs and shorts were increased in cable. The overall position was little changed at -GBP 821mn.
  • Buying dominated in USDJPY, although shorts were also increased. The open position increased by a decent USD2.3bn to +USDD7.2bn.
  • A decrease in longs and increase in shorts resulted in the net AUDUSD short increasing by AUD355mn to -AUD2.7bn.
  • In contrast to activity in USDCAD, leveraged players increased their USDMXN shorts and cut back their longs. The net short position increased by USD398mn to -USD1.2bn.
  • The long USDCHF trade decreased by USSD485mn to USD914mn. This was as a result of an increase in shorts rather than capitulation in longs.

The CFTC data is often criticised as being out of date and not wholly representative of the market because it only covers activity on the CME. The first point is undoubtedly true; as for the second, in the past the CFTC data has been very representative of broader activity in the OTC market.