Saxo Bank publishes weekly trader engagement reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM and VIX currency futures, we use the broader measure called non-trading.
The summary below highlights the futures positions and the changes made by commodities and forex hedge funds until Tuesday, May 18th. were seen in the commodities sector where the one-month synchronized rally has increasingly shown signs of slowing down.
The Bloomberg Commodity Index fell 0.7% on the week as an emerging correction in agricultural commodities, led by soybeans and corn offsetting gains in energy and precious metals. In response to these developments, hedge funds cut bullish bets on commodities for a second week, with the long net total on 24 futures falling 4% to a four-week low at 2.4 million lots . General sales in all sectors except Precious Metals were led by corn (25.3k lots), soybeans (25.2k), sugar (20.8k) and petroleum crude (22.2k), with most purchases concentrated in gold (11.3k) and natural gas. (12.1k).
Speculators reduced bullish bets on oil for a second week, with Brent and WTI combined net long falling 22.2k lots to 634k lots to a six-week low. In Brent, the decline was due to an increase in short selling, with gross short selling reaching its highest level since November. The short-term outlook has deteriorated again with the prospect of an increase in Iranian production and an increase in OPEC + production hitting a market that still lacks a synchronized global recovery in demand. Despite a strong recovery in fuel demand in the United States and Europe, the continuation of the Covid epidemics in Asia will continue to have an impact on the short-term outlook and in particular on the recovery in demand for jet fuel, which appears to be very slow with restrictions and lack of interest. intercontinental isn’t going away anytime soon.
Petroleum products continued to be bought, with net buyers of gas (143,000 lots) and NY Harbor ULSD (24.5) both reaching their highest levels in 30 months. Meanwhile, natural gas saw new buys as the contract made another, so far unsuccessful, attempt to gain a foothold above $ 3.
Gold’s renewed momentum contributed to a third straight week of fund buying, pushing net long up 12% to 107k lots, a 16 week high. Gold has failed to stage a three-week buying spree of this magnitude since last June, and it highlights the continuing improvement in the technical outlook during a period of stable Treasury yields, a weaker dollar and above all an increased volatility of crypto-currencies. The improving technical outlook was confirmed last week by the move above the 200-day moving average, last at $ 1,845, and the breaking of the downtrend from last August’s high of $ 2,075.
Silver returned some of its recently gained relative strength against gold in response to continued profit taking that hit some of the industrial metals that were flying high until recently. The net long was reduced 3% to 46.5k lots while a second week of net copper selling reduced the net long there by 15% to 51.9k lots.
The new profit taking helped reduce 9% to 963,000 lots in the long-held net in ten major grains and commodities. Most notable was the acceleration in net sales for the three key crops, where reductions of 25,000 lots of corn and soybeans reduced the long net to a December low at 458,000 lots. The upward momentum for soybeans moderated with rapid planting progress in the United States, while the more than 11% decline in wheat in two weeks was the result of heavy rains in Kansas, the first growing state to lets hope for record returns. Maize, meanwhile, managed to remain stable, supported by tight supply, with a focus on Chinese purchases, now at unprecedented levels, and increased demand from the renewable fuel industry.
Mixed flows in the week leading up to May 18 resulted in an unchanged short dollar position against ten IMM currency futures and the dollar index. The purchase of EUR (5.9k lots) and CAD (7.5k) is offset by the sale of JPY (9.2k) and GBP (3.3k).
From a ten-year high of $ 36.8 billion on Jan. 19, the dollar short against the mentioned futures contracts fell to a low of $ 5.2 billion five weeks ago before the Short sellers did reappear to bring it down to the current $ 15.5 billion.
What is the Trader 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 of the futures markets into different user groups based on the asset class.
Commodities: Producer / Merchant / Processor / User, Swap dealers, Money management and others
Financial services: concessionaire / intermediary; Asset manager / institutional; Leverage funds and others
Forex: a wide distribution between commercial and non-commercial (speculators)
The reasons why we mainly focus on the behavior of the highlighted groups are:
- They are likely to have tight stops and no underlying exposure covered
- This makes them the most responsive to changes in the evolution of fundamental or technical prices.
- It provides views on major trends but also helps decipher when a reversal is looming
This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, which is part of the Saxo Bank group via RSS feeds on FX Empire