Summary:

• the latest CFTC data show negative net positioning in USD, highly positive in AUD and EUR 
• Sugar is among commodities where prices have been depressed by speculators

The CFTC data that is being released at the end of each trading week provides interesting view on market positioning of speculative capital. A rise in interest could benefit a given market but when positioning becomes extreme it could actually be a burden and herald a reversal (in other words: when “everyone” has invested in a given asset, how could its price go higher?). This time we take a look at two markets where positioning could potentially spark a reversal: AUDUSD and Sugar. 

AUDUSD

The US dollar was under pressure again on Friday as Janet Yellen chose not to speak on monetary policy during her Jackson Hole outing. The CFTC data reveals that it was another week when a net positioning in the greenback was negative – the first such case since 2014. There were some good reasons for weaker USD this year (Trump, weaker data) but now the bar of expectations has been lowered and for instance a strong NFP report (Friday) could give USD some new life. 

The US dollar is no longer in favour – there are more speculative shorts than longs. Source: Bloomberg 

Meanwhile AUD net positioning has not been that high since early 2013. Interestingly the Aussie enjoys so much interest despite mixed data from Australian economy. The reason is China. Whatever the reason behind a return of a bull market to industrial metals (some blame speculation while others believe it’s sound economic growth) it benefits AUD. However, high net positioning is a risk – any bad news in China could hurt the currency. 

The AUD positioning has not been this high since 2013. This could be a risk for the currency. Source: Bloomberg 

As a result we get opposite extreme positioning on AUDUSD, so a correction on this pair could be just a matter of time. However, keep in mind that the technical picture still looks good for the buyers: an upper limit of a previous long-term consolidation has been used as a support and the pair seems to have a momentum to the upside. 

AUDUSD could be overbought but technical picture remains favourable. Source: xStation5 

Sugar

Sugar prices have been under pressure from oversupply for a long time. We saw a huge bear market here in 2016 and 2017. However, speculators have become the most pessimistic on outlook for sugar in 10 years. This could represent an opportunity for sugar price.

Speculators are overwhelmingly betting on lower sugar prices. This could be a chance. Source: Bloomberg 

When we look at the chart, sugar could no longer be in a free-fall. We can see a potential double bottom formation with a second low higher than the first one. It is quite possible that prices could test a neck-line of this formation that is placed at 15.20.   

A neck line of a double bottom formation on sugar could be around 15.20. Source: xStation5