Long dollar positions continue to grow
US Dollar Index:
The NYBOT traded contract saw the commercial
traders increase their bets against the dollar as contract failed to break above
the 90.00 handle. Volume picked up on during the last weeks sell-off indicating
an increased pressure by the dollar bears, however the On Balance Volume
indicator continues to point to an increasing upside volume that is adding to
the positive long term outlook regarding the Dollar Index. Speculative positions
remain net long with 11,139 net long contracts, while commercials are running a
12,839 contracts net short position, thus adding to a possible pullback in the
Dollar Index. Open interest rose by 1,988 to 19,561 contracts outstanding.
Euro speculative positions remained neutral with
-1,898 contracts net short with overall open interest climbing by 7,640
contracts from an earlier week to 143,338 contracts outstanding. Commercial
positioning remains net long with 12,582 contracts, which should add to pressure
on the contract should the euro break the 1.1876, the 2005 low.
British pound speculative positions flipped to
the short side as the pair slid below the psychologically important 1.8000
figure, with speculative traders holding net short 16,860 contracts. Commercial
positioning remains net long as large traders increased their long exposure in
the sterling by another 23,153 contracts, while reducing their shorts by 1,263
contracts, with commercial net longs totaling 18,967 contracts, thus creating a
possibility that banks and other institutions expect 1.7500 handle to be a
temporary bottom. However a collapse of the 1.7200 handle will most likely force
commercials to liquidate thus exerting further downward pressure on the
contract. Overall open interest grew by additional 12,449 contracts to 89,889.
Swiss Franc speculative positions remained net
short with traders adding to their net short positions as net shorts grew to
47,126 contracts. Commercials remained undeterred as they long the contract with
overall net long climbing to 61,096 contracts, thus establishing a view that the
Swiss Franc is ripe for a short squeeze with large institutions running the
squeeze. Open interest rose by additional 11,022 contracts to 87,779 contracts
Japanese Yen speculative positions remained net
short as the pair approached the psychologically important 115.00 figure, with
4,233 additional speculative short contracts coming to the market with
speculative side running total net short of 63,299 contracts. Commercials
continued to build their net long positions with 69,565 net long commercial
contracts outstanding as large institutional traders most likely expect the pair
to test the 115.00 handle. Open interest rose by additional 29,408 contracts to
167,979 contracts outstanding.
Canadian dollar speculative positions remained
net long, but some of the speculators liquidated their net long positions with
38,031 net long contracts remaining in the market. Commercials added to their
net long positions with 57366 net short commercial contracts outstanding as bank
and other institutional expect the Loonie will most likely retest the bids
around 1.1600 handle. Open interest fell by 1,879 contracts to 108,178 total
contracts outstanding, reflecting the liquidation by the speculators.
Australian dollar speculative positions remained
net long, with speculative traders increasing their long bets by 5,925 contracts
to 28,870 net speculative long contracts as the pair remained above the .7500
handle. Commercial traders and hedgers remained net short with 43,745 net
commercial shorts currently dominating the contract as large institutions most
likely expect the pair to head toward .7000 handle, thus setting the speculative
traders for a squeeze. Open interest rose by 6,406 contracts to 69,587 total
contracts outstanding as more speculative longs entered the market.
Richard Lee is a Currency Analyst at Forex
Capital Markets. Employing both fundamental models and technical analysis
applications, Richard contributes regularly to DailyFX, Yahoo Finance and Comtex.
Prior to joining the research team, Richard was one of the senior instructors
for the FX Power Course, teaching thousands of traders the basics of currency
trading, technical analysis and how to implement trading strategies. He has
extensive experience in trading the spot currency markets, options and futures.
Richard previously traded FX, equity and equity derivatives for four years as
well as work for a private equity consortium before joining FXCM.