FX Closing Note: Will there be any storm after this calm?
FX Closing Note: A boring day draws to a close
Not much moving and shaking in today's market as markets were back in forth in a narrow range ahead of tomorrow's German IFO and the Bernanke testimony on Wednesday. Other important event risks this week are the US treasury auctions on Tuesday through Thursday, in which 2-, 5- and 7-year notes will be auctioned, respectively, to the tune of $118 billion total. The auctions will be interesting to watch in light of the Fed's most recent move on the discount rate and in the wake of Bernanke's testimony.
Today actually saw an $8 billion auction of 30-year TIPS, the results of which were fairly weak, but this auction was rather modest in size and failed to move the bond market on the day.
CFCT: COT (Commitment of Trader) reports
We take advantage of a slow day to have a look at the COT reports for the latest week, which show the currency futures market's position as of last Tuesday. We have noted the large short Euro position in the market - a phenomenon that is revealed in the chart below, which shows a record low percentage of long noncommercial, or "spec" positions in the market as of last Tuesday. The green lines show how in the past, the specs have been quicker to "turn" than the market, though the huge episode back in 2007-08, when specs increasingly stepped away from EURUSD while it kept rising doesn't follow this pattern (could this have been due to reserve diversification by China...after all, they repegged in July of 2008, just before the EURUSD began to plummet...?)
AUDUSD
The positioning in AUDUSD is far less extreme and has traditionally been a "perma-long" position until the 2008-09 debacle swept through markets. Note how the specs were less committed to short positions before AUDUSD turned to the upside in 2009 and how the recent smaller consolidation was also tipped off by a slightly less bullish spec long position.
The positioning in AUDUSD is far less extreme and has traditionally been a "perma-long" position until the 2008-09 debacle swept through markets. Note how the specs were less committed to short positions before AUDUSD turned to the upside in 2009 and how the recent smaller consolidation was also tipped off by a slightly less bullish spec long position.
EURAUD
Interestingly, if we compare the ratio of Euro longs to AUD longs, we see how the spec market follows the dominant trends. The ratio is at a record low, helping to show that much of the currency market's current positioning is more Euro negative than USD positive. From a contrarian perspective, one wonders how long this move can continue. An AUD contrarian would find more powerful arguments in the below chart than in the AUDUSD positioning chart.
Interestingly, if we compare the ratio of Euro longs to AUD longs, we see how the spec market follows the dominant trends. The ratio is at a record low, helping to show that much of the currency market's current positioning is more Euro negative than USD positive. From a contrarian perspective, one wonders how long this move can continue. An AUD contrarian would find more powerful arguments in the below chart than in the AUDUSD positioning chart.
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