IMM: Bets against euro at fresh record; speculators flip positions in GBP, JPY

The latest Commitment of Traders report, issued by the Commodity Futures Trading Commission, shows investors net sold more than 11,000 EUR futures contracts in the week to June 5, taking the value of their bets against the single currency to an all-time high of $33.4 billion.

News of a rescue package for Spanish banks over the weekend could well provide room for a relief rally in the EUR, given the extended short position in the single currency.

“Obviously, a large short position does not mean the currency must bounce,” says Marc Chandler at Brown Brothers Harriman.

“It is important to keep in mind that the foreign exchange market is primarily an over-the-counter market and at an estimated $4 trillion a day in turnover is the largest of the capital markets.”

That said, Chandler believes there is room for position squaring ahead of the elections in Greece on June 17, which could allay fears of an imminent Greek exit from the eurozone.

“Provided the EURUSD holds above $1.2420, a new leg up is likely,” he says.

“The $1.2620 area remains important, but if this is taken out, $1.2670 becomes the next immediate hurdle, but there is potential toward $1.2780-$1.2800. The technical condition of the euro may be improving.”

Meanwhile, speculators switched from short yen positions to long positions for the first time since late February, buying a net $3.7 billion of JPY contracts over the week.

Speculators also flipped their positions in GBP, having been long sterling since late April. Investors sold a net $420 million of GBP contracts to take the value of their short positions in the currency to $276 million.

Elsewhere, traders added aggressively to their short position in the AUD, net selling $1.5 billion of AUD contracts to take the value of their short positions in the currency to a record $5 billion.