Saxo Bank publishes weekly Trader Engagement (COT) reports 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.
This summary highlights the futures positions and the changes made by hedge funds in commodities, forex and financials until Tuesday, September 28th. energy tightening and higher Treasury bill yields due to heightened expectations of Fed debt reduction.
The Bloomberg Commodity Index, which does not include soaring EU and Asian gas prices, coal and carbon emissions, jumped 5.4% in the week to 28 September, with gains seen in most sectors led by energy and materials. Overall, speculators were net buyers of 16 of the 24 major commodity futures contracts tracked in this update, supporting a 6% increase in overall net exposure to 1.99 million lots.
The global energy crisis was at the center of concerns, with natural gas surging 21% on the week while crude oil jumped nearly 7% in anticipation of growing consumer demand switching to diesel, to propane and diesel from gas and coal at a punitive price. Interestingly, the surge in natural gas prices resulted in only a small 2% increase in net long, with the increase mainly due to short coverage.
The biggest exception being gold, which saw bullish bets cut by a third as Treasury yields surged and the dollar rose. buyers returned just before prices collapsed again last Wednesday.
Buyers returned to the grain sector for the first time in six weeks as soybeans and corn saw renewed demand. Cotton’s 11% jump to a ten-year high helped push the net to its highest level since May 2018, while coffee’s comeback to $ 2 / lb attracted new long and short covers.
The continued strength of the dollar in the face of adversity in response risk driven by falling stocks, concerns over Chinese real estate debt, higher yields and Fed cut expectations contributed to an increase of 14 % of the long greenback against ten IMM currency futures and the dollar index to a new 19-month high of $ 17.8 billion. The week of the report did not include last Wednesday’s breakout when the euro fell to its lowest level since July 2020 while the broad Bloomberg Dollar Index hit an 11-month high.
The biggest victim was the euro, where 11.2,000 sales brought the net back to neutrality. The two largest short positions in the Yen and AUD expanded further, with the latter reaching a record high of 86.4,000 lots. The purchase of pounds sterling, NZD and especially Canadian dollars reduced the overall impact by the equivalent of a billion dollars.
What is the Merchant Engagement Report?
COT reports are published by the United States 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 depending on the 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
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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of the Saxo Bank group via RSS feeds on FX Empire