Latest CFTC Release Dated August 8th, 2006:
· Euro Longs Reach Record High
· Traders Remain Extremely Long British Pounds
US Dollar Index: Implied positioning is nearing extreme levels (short USD). Implied shorts have inceased two weeks in a row now. If this trend continues, then we would likely see a weakening dollar going forward which would correspond to a bottoming in the USD and subsequent reversal.
EUR: Speculators are the longest they have ever been (net). Speculators have been building longs since flipping to net long back in December 2005. The difference in positioning is the largest it has ever been also. Extremely long speculator positioning points to a topping out in the Euro over the coming weeks.
GBP: Long GBP positioning increased for the 6th week in a row. Traders are the longest they have been and the difference in positioning between speculators and commercials is also the longest it has ever been (same situation as Euro). The interpretation is the same as it is for the euro. That is, the extreme positioning favors a topping out in GBP over coming weeks.
CHF: CHF speculators increased short positionis a week after cutting short positions in half. This is indicative of the choppy trading that we have seen in USD/CHF lately. There is little to gather from the data though since speculators positioning is not extreme.
JPY: Short interest peaked two weeks ago but Yen speculators remain extremely short Yen. The difference in positioning between speculators and commercials is still extreme as well. Since specs are short Yen (long USDJPY), the risk remains for Yen strength (USDJPY weakness).
CAD: Specs flipped to net long CAD after flipping to net short just two weeks ago. Similar to CHF, CAD has traded in a choppy fashion lately. Well see how the data comes in next week. If specs begin to build CAD longs, then some CAD strength is likely. If specs flip back to CAD short, then CAD weakness is more likely going forward.
AUD: Positioning remains extreme, although specs did cut longs for the first time in 7 weeks. This should be a warning that AUD/USD could turn violently to the downside after rallying significantly 4 out of the last 5 weeks. (Notice the spike in long positioning at each top in the chart above).
