Latest CFTC Release Dated June 6th, 2006:
Euro Longs Are a New Record?Again
GBP Data Indicates Weakness Going Forward
US Dollar Index: Specs US Dollar index futures positioning remained negative for 6th week in a row and implieds increased from -214,348 to -177,585. The decrease in implied net shorts is indicative of continued consolidation off of recent dollar index lows. Implieds are still extreme to the short side and thus the larger trend remains dollar negative.
EUR: Specs are net long 88,196, and broke the old net long record from last week of 79,884. While the number is extreme, we do not expect a turn in the euro until a significant decline in open interest. For example, the end of 2004 rally ended just after open interest was reported declining 87,395 in the week ending 12/14/04. Open interest actually increased a sizeable amount this past week by 14,050 to 209,552. This is the largest amount since 12/7/2004 when open interest was at 223,808.
GBP: Cable spec net longs fell by 17,411 last week to 22,286 and open interest fell by 6,785. The fall in open interest is modest but not high enough to confidently call for a market turn. Still, the large decrease in net longs does propose weakness in GBP going forward.
CHF: CHF positioning is little changed this past week. Specs decreased longs by 1,211 and commercials added to shorts by 2,957. Due to the specs flipping to net long on 5/23, the path of least resistance is still towards CHF strength until extreme positioning. The difference between specs and commercials is at just the 32% percentile (when measured against the last 26 weeks).
JPY: JPY longs fell by 4,738 to 21,003 last week as USD/JPY has digested losses. Much like USD/CHF, the larger tend remains with JPY strength and has since the flip to long JPY on 5/2. There is little significant information to gather from this weeks data.
CAD: We mentioned last week that the trend has been towards CAD strength and COT data suggests that this will remain until some signals of a turning point arise. CAD ended up strengthening significantly last week and this should continue with open interest increasing last week. Increasing open interest in a strengthening market is indicative of a healthy trend.
AUD: AUD traders cut longs by 12,870 and AUD/USD fell for the 4th week in a row. Although specs cut longs last week, open interest was little changed, falling 3,428. With specs long Aussie, one would want to see a fall in price accompanied with a significant fall in open interest before calling for continued Aussie weakness. Thus, the favorable view is that recent Aussie weakness is a correction.
