IMM Positioning

Speculative investors are accumulating CAD longs

The latest IMM data covers the week from 29 September to 6 October.

Speculative investors re-entered the USD shorts that were unwound prior to the publication of US non-farm payrolls. This has been a profitable strategy, as the dollar came under renewed pressure in the week to 6 October. Coinciding with the correction higher in US yields last Friday, however, the dollar has regained some of its losses – potentially also reflecting profit taking on short dollar positions.

Long CAD positions have been built further and net longs against the dollar now stand at 41% of open interest. The Canadian dollar has performed strongly in recent weeks and gained further momentum last Friday as strong employment data fuelled speculations of an early interest rate hike in 2010. The latest price action in USD/CAD indicates that CAD longs have probably been built even further following the collection of IMM data. Hence, the downside risk from a position squeeze is increasing.

While a decent share of the re-entered USD shorts has been added against CAD, the bulk of the increase in USD shorts has come from an increase in EUR longs. Net long EUR positions currently stand at 30% of open interest.

Sterling remains under pressure and while speculative investors already had significant short GBP positions on their books, net short GBP positions have been built even further. Positioning is thus becoming an increasingly important factor when assessing the short-term risks in both GBP/USD and EUR/GBP

The IMM data

The IMM data is part of the Commitments of Traders (COT) reports published by the U.S. Commodity Futures Trading Commission (CFTC). The IMM data provides a breakdown of each Tuesday's open futures positions on the International Money Market (IMM) a division of the Chicago Mercantile Exchange. All of a trader's reported futures positions in a commodity are classified as commercial if the trader uses futures contracts in that particular commodity for hedging as defined in CFTC Regulation 1.3(z), 17 CFR 1.3(z). A trader may be classified as a commercial trader in some commodities and as a noncommercial trader in other commodities

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