Saxo Bank publishes weekly trader engagement reports (BED) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM and VIX currency futures, we use the larger measure called non-trading.
The summary below highlights the futures positions and the changes made by hedge funds in commodities, forex and financials until Tuesday, June 15. A week that covered the period up to last week’s FOMC meeting and the hawkish surprise it caused. Aside from a weaker dollar which attracted further short selling, some of the other more notable commodities markets had already started to see the adversity of risk rise, while bond yields fell before starting to rise. roller coaster ride that has finally brought down today to an unchanged level before FOMC levels. The Bloomberg Commodities Index traded down 2.2% as the rotation from agriculture and metals to energy continued.
The commodities sector saw a small amount of net sales ahead of last week’s FOMC meeting, but behind the 1% reduction to 2.4 million lots, we found a week where speculators continued to shy divert from agriculture and metals, industrial and precious, and towards energy, in particular crude oil. Chinese efforts to curb industrial metal prices, falling gold prices due to reduced inflation expectations as the market “buys” the transitional message from central banks, and improving weather and climate conditions. growth in the United States have all led to a long sell-off and a reduced appetite for exposure to these sectors.
The combined net purchase of petroleum and petroleum products (excluding natural gas) reached 977,000 lots, the biggest bet on rising energy prices since October 2018. While industrial metals suffered this which looks like a short-term setback following the increasing intervention of the Chinese authorities in the market. and a reduced focus on reflation, the energy sector has increasingly become the benchmark for commodities. This in the belief that in the short term, OPEC + will maintain market tension as global demand continues to recover, and later due to growing concerns that the lack of CAPEX devoted to new production could leave the market undersupplied from the end of 2022 and beyond.
Combined long net Brent and WTI crude oil reached 737,000 lots, again an exposure level that was last exceeded in October 2018. A narrowing of the spread on Brent and speculation that the levels storage at Cushing, the delivery hub for WTI futures contracts, could decline further amid strong demand from refineries in the Midwest contributed to a 35% reduction in the gross short position, supporting a peak in the long ratio / short to a three-year high of 22.8 long for one short. While highlighting the risk that a market could become one-sided, it also shows the strong belief in higher prices currently being displayed by investors.
Bullish gold bets were reduced for a second week with profit taking and further short selling ahead of the FOMC meeting and following the recent rejection above $ 1900. The 10% reduction reduced the long net to 114,000 lots, a four week low. Silver saw a small amount of buys while copper buys were reduced to just 20,000 lots, a one-year low and some 71,000 lots below last October’s high. Once the weak technical outlook, supported by an expected improvement in the fundamental outlook, starts to turn, the price could see a strong rebound from buyers return.
The grains and soybean sector continued to weaken as speculators reduced combined net long positions in corn, wheat and soybeans by 15% to 352,000 lots, the lowest since last October. While the net sale of wheat extended to 8.4,000 lots, it was corn and especially soybeans that recorded the bulk of sales. This on a combination of improved weather conditions increasing production expectations and potentially reducing the demand for biofuels to be blended with gasoline.
In forex, flows on ten IMM currency futures and the Dollar Index were very mixed, but overall resulted in continued selling of dollars with net short hitting a three-month high at 19. , $ 3 billion.
However, as the table below shows, speculators were in general risk mode on the major pairs with both long and short positions reduced. This just the day before the FOMC sparked a hawkish surprise that helped send the greenback significantly higher to record its fourth straight week of gains, challenging short consensus trading on the dollar.
What is the Merchant Engagement Report?
COT reports are published by the US Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and diesel. They are released every Friday after the US close with data for the week ending the previous Tuesday. They break down the open interest in futures markets into different user groups based on asset class.
Commodities: Producer / Merchant / Processor / User, Swap dealers, Managed money and other
Finances: Dealer / Intermediary; Asset manager / Institutional; Leverage funds and other
Forex: a wide distribution between commercial and non commercial (speculators)
The reasons we mainly focus on the behavior of the highlighted groups are:
- They are likely to have tight stops and no underlying exposure who is covered
- This makes them most responsive to changes in the evolution of fundamental or technical prices
- It provides views on major trends but also helps to decipher when a reversal is imminent
This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of the Saxo Bank group via RSS feeds on FX Empire