Latest CFTC Release Dated June 20th, 2006:
· Specs Continue To Sell Euros
· AUD Specs Flip To Net Short
US Dollar Index: The third week in June is one of 4 times during the year that contracts are rolled over and is the main reason that changes in open interest are so enormous. Still though, the change in the USD index is larger than normal implying a shift in market sentiment. Open interest fell by 15,509. Open interest fell 6,973 the same week in June last year. We like to measure positioning on a percentile basis and it is worth noting that implied positioning has fallen from the 100th percentile (massively short USD) to thr 96th, 76th, and now 60th percentile signaling that USD strength could persist.
EUR: The story is the same with regards to euro interest. Specs continued to cut longs last week this time by 9,356 and the difference between specs and commercials is now in the 64th percentile. We always look for the 100th percentile and a significant dropoff from there can call market turns. Last week, the difference in positioning went from 100 to 72. This week, the difference is down to 64 and the dumping of euros favors the bearish side.
GBP: Cable specs were little changed. The trend is towards weakness though as the difference in positioning (between specs and commercials) went from the 100th percentile to the 84th (indicated in the 6/6 report) and to the 76th last week. The percentile remains in the 76th percentile with little change this past week.
CHF: Swiss traders flipped to net short last week and added to the position this week by 2,590. Specs are now short 5,472. Remember that specs are often correct in positioning until the turning point. This means that as long as specs sell CHF, CHF should weaken. Once specs are extremely short (as measured by our percentile method using the difference between commercials and specs) we can begin to look for a turn. This does not happen at every turn but a turn usually occurs at extreme positioning.
JPY: Yen specs added to shorts a week after flipping from net long by 13,410 and are now short 23,007. The flip from long to short preceded the nearly 200 pip rally last week and the current data favors a continuation of JPY weakness. The scenario is the same as that of CHF where weakness should be expected until specs and commercials differ on positioning by a wide margin.
CAD: CAD specs cut longs by 9,373 last week and are now long 23,978. Specs flipped to net long CAD on 4/11 near 1.1500 USD/CAD. As expected on a flip, the CAD has strengthend but not to the extent that would lead to hysteria and ultimately extreme positioning and a pending reversal. Still, with specs net long CAD, the data cautiously favors CAD strength.
AUD: The difference between AUD specs and commercials is now down to the 8th percentile after being at the 100th percetile on 5/16. The following week, the difference fell to the 80th percentile and we proclaimed that the path was likely down for AUD. That has played out and that opinion is reinforced with the specs flipping to net short this week.
