As suggested in the CFTC Commitments of Traders report in the week ended February 25, NET LENGTH in USD Index added +849 contracts to 26 077. Speculative long positions dropped -638 contracts and short positions declined -1 487 contracts. Bets on both sides obviously shrank as the market pondered about the next move of the Fed. We expect NET LENGTH to drop in the coming week as the speculations that the Fed would push forward rate cut to as soon as this month. CME’s 30 day Fed funds futures have priced in a 95% chance of a -50 bps cut, compared with standard reduction of -25 bps. Concerning European currencies, NET SHORT for EUR futures soared +22 514 contracts to 114 021. NET SHORT bets should be trimmed in the coming week amidst the sharp rally in the single currency. This was driven by speculations of FOMC rate cut later this month. NET LENGTH for GBP futures added +340 contracts to 29 598.
On safe-haven currencies, NET LENGTH of CHF futures slipped -925 contracts to 616. NET SHORT of JPY futures jumped +29 168 contracts to 56 389. This comes in line with our analysis that the safe-haven demand for Japanese yen has been reduced amidst the current risk aversion period. Investors tend to favor gold and US dollar as the country struggles with heightened risk of economic recession and coronavirus outbreak domestically. On commodity currencies, NET SHORT for AUD futures rose +6 375 contracts to 43 852. Speculative long positions gained +8 695 contracts while shorts jumped +15 070 contracts. Separately, NET SHORT for NZD futures gained +3 124 contracts to 15 311 during the week while NET LENGTH for CAD futures almost doubled (up +6 807 contracts) to 14 624.