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Macro Outlook: The US rate cut cycle has begun
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Chief Investment Strategist
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COT: Speculators rebuild dollar longs; VIX short continues to climb
Ole Hansen
Head of Commodity Strategy
Summary: Buoyed by hopes about a "phase one" trade deal speculators bought dollars for the first time in three weeks while the record short in VIX continued to expand
Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.
Speculators rebuild net long positions on the Greenback following three weeks of selling. The dollar long against ten IMM currency futures rose by $2.2 billion to $14.4 billion. Small buying of EUR, GBP and NZD were more than off-set by selling of JPY, CAD and AUD
The small reduction in GBP net shorts took the position to the least bearish since May. Speculators in the EUR meanwhile maintained a net short close to 58,000 lots (1 lot = €1250,000), a level around which the position has swung for the past four months. Despite showing signs of bottoming out the JPY short nevertheless expanded for a ninth consecutive week to the most elevated since June.
Leveraged fund positions in bonds, stocks and VIX
Leveraged money managers were strong buyers across the U.S. yield curve with the net reduction in bearish bets equaling a DV01 (value of one bp change in yield) of $19 million. The speculative short in the Cboe VIX future reached a new record of 206k lots. The rate of increase however slowed compared with previous weeks. This in response to fresh buying which saw the gross long rise by 7k to 92k lots, a nine-week high
What is the Commitments of Traders report?
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.
The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.
In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.
In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.
Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.
They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.
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