Looking at last week’s Commitment of Traders report, notable changes include falling net short positions in the Japanese yen and falling net long positions in gold. Changes in other major currencies and commodities were fairly limited. Crude oil remains at a bullish extreme this week, based on 3-year trailing averages and net speculator positions as a proportion of total open interest.
The purpose of this weekly report is to track how the consensus is positioned across various currencies and commodities. When net long positions become crowded in either direction, we flag extended positioning as a risk. Crowded positions do not suggest an imminent reversal, but should be considered as a significant risk factor when investing in the same direction as the crowd. This is shown below:
CFTC COT speculator positions (futures & options combined) – February 27, 2018
Notable extremes, significant changes in weekly positions, and large net positions as a proportion of open interest are highlighted above. Extremes in net positions are highlighted when speculator positioning is more than two standard deviations above trailing 1-year and 3-year averages. Weekly changes are highlighted when they are significant as a proportion of open interest. Finally, net positions as a proportion of outstanding interest are highlighted when they are large relative to historical averages. 1-year and 3-year z-scores are visually represented below:
1-year and 3-year z-scores based on net speculator positions
Looking more deeply at recent changes, short futures and options positions in the Japanese yen are lower. Last week, there were a total of 153,793 contracts short the yen. This week, the number of short positions has fallen to 142,502 contracts. Yen bears appear to be fleeing as the currency rallies. Turning to gold, short positions in the precious metal were 62,493 last week. This week, the number of short positions has increased to 72,111. The significant increase in short gold positions is somewhat surprising, given that the US dollar remains out of fashion. Note that net positions fell for both the USD index and the US dollar this week.
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