Latest CFTC Release Dated June 27th, 2006:
· Specs Add to Euro Longs
· AUD Specs Flip Back to Net Long
US Dollar Index: The USD got slammed last week as specs decreased short positions throughout the week. Short positioning as measured by implieds also fell from 68,979 short to 52,795 short. The pattern in positioning is similar to the end of 2004 when implieds were extremely negative the index at the end of November but the bottom wasnt actually until a month later and a sustained dollar rally didnt occur until late March (circled on chart above). Implieds were extreme at the end of May which marked a short term bottom. However, implieds are still negative and will likely look to add to shorts after last weeks dollar decline. Once the positioning reaches extreme readings, we will again look for a turn.
EUR: Specs increased longs by 12,180 last week as the pair skyrocketed. The difference in positioning between specs and commercials increased from 64% to 72% - which is indicative of a healthy trend. Open interest also increased by 15,562, another sign that the trend in favor of the euro is strong. The data suggests that the uptrend should persist
GBP: In contrast to the euro, specs cut Cable longs by 16,831. This is a significant amount and is indicative of the GBP weakness which is apparent in the crosses. Open interest hardly changed, increasing by 101. Specs are still long Cable but have decreaed longs from 39,697 on 5/30 to 6,571 (last report on 6/27). With little interest in Cable, the currency looks vulnerable.
CHF: CHF traders increased short positions 10,417 and are now short 15,889. This suggests that last weeks CHF rally is not as strong as appears. In fact, the currency did lose ground against other currencies. With the data and price action of USD/CHF in disagreement, well need to wait for another week of information before assessing the situation.
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JPY: Yen specs added to shorts again, this time by 12,565. The situation is just like CHF in that USD/JPY is decreasing (JPY strength), but specs are selling JPY contracts. As such, the currency could show weakness in crosses or we may see a rertacement in USD/JPY.
CAD: CAD traders added 6,331 to net longs. The data has been of little help lately with specs adding to longs one week and cutting longs the next. However, the difference between specs and commercials is increasing and is currently at the 60th percentile. If we do see a move in CADs favor, then we could reach extreme levels in CAD positioning at which time a turning point would be more likely.
AUD: Specs flipped back to long after being short for one week. The big rally in AUD last week caught specs off guard and they quickly flipped back to net long. The flip was accompanied with an increase in open interest of 4,385. <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Positioning in AUD is similar to positioning in the euro and the data favors continued AUD strength.
