02 January 2012 at 9:28 GMT
As 2012 begins the nervousness about the fate of the Eurozone continues. The latest data from the CFTC which was collected last Tuesday showed that speculators in increased numbers continue to express their negative views on the Eurozone by shorting the Euro. The negative Euro sentiment has now easily surpassed levels that were seen when Greece faced possible default back in May 2010.
Although the overall direction of the Euro remains to the downside investors should, at least short term, be aware of the dangers of a potential bounce given the elevated short position that now exists.
The main beneficiary of this selling has been the dollar with most other currencies playing a secondary role. The net dollar long position is now back above 20 billion dollars and last week alone some 3 billion dollars were added.
Long positions in AUD rose by 30 percent as its AAA status continues to attract buyers looking for a safe haven. Given the currency’s strong relations to (slowing) Chinese economic activity this looks like a potential dangerous strategy and further upside seems limited. Other commodity currencies like the CAD saw its net short position being reduced somewhat while the JPY failed to attract new buyers with the net long position having been reduced for the last five weeks in a row.
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 U.S. currency 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 is where currency futures are traded.