The Implications of CFTC Speculative Positions

The latest Commitment of Traders report (as of last Friday) highlights some extreme levels of speculation in several different assets.

Positioning in currency futures is supportive of a strengthening in the EUR, GBP, and JPY versus the USD as net long positions in the dollar moderate somewhat in the coming months.

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With respect to commodities, the massive contraction in the net short position in gold seems to have slowed, with gold prices perking up a bit as a result. Meanwhile, the net long position in oil has contracted from a record high last November, leaving WTI with less bullish prospects.

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Finally, the net position in 10-year US treasuries has never been this high. History suggests that a decline from this elevated level should coincide with a decline in yields (which have already pulled back from December highs).

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To sum up, the positioning of the “smart money” implies that we can anticipate a moderation in the USD, support for gold (and lackluster gains for oil prices), as well as an easing in US treasury yields.

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