16 January 2012 at 8:32 GMT
Hedge funds and large investors used the uptick in EURUSD early last week to increase their already record large short position in the Euro currency. They sold another 16,286 contracts of Euro futures bringing the net holding to -155,195 contracts, a third consecutive week with a new record short.
The main currency benefitting from this selling of Euros were the dollar with the long position rising to USD 17.6 billion. The market has been net long dollars since September 2011 and is long the currency against every other currency listed on the IMM except for AUD, NZD and JPY.
It is interesting to note that short EUR positioning as a percentage of open interest stands at 53 percent, the highest level in five years, which is a clear indication that investors hold a strong conviction in the position.The chart below also shows how holders of long position are decreasing as the bounce has become more illusive.
The stronger AUD continues to benefit from its triple-A rating, outflows from Eurozone sovereigns and its close proximity to China as opposed to the stricken economies of Europe. Investors added 8,667 contracts last week bringing the net position up to USD 5.5 billion equivalent.
JPY longs build for the fourth week running, again most likely as a consequence of the turmoil in Europe. The net long position stands at USD 9.7 billion equivalent.
Background information: The Commitments of Traders is a report issued by the Commodity Futures Trading Commission every Friday with data from the previous Tuesday. It comprises the holdings of participants in various U.S. futures markets split into "commercial" and "non commercial" holdings. The non commercial or speculative holding are typically institutional investors such as hedge funds and CTAs. Analysts and investors follow changes in these positions because such transactions can reflect an expectation of a change in prices. The IMM, which is a division of the CME, stands for International Monetary Market and it is where currency futures are traded.