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Weekly COT report: Fastest pace of AUD short covering since March 2020

Article By: ,  Market Analyst
March 21, 2022 12:16 AM

As of Tuesday 15th March 2022:

  • The Australian dollar and euro futures contracts saw the largest weekly repositioning, with AUD net-short exposure falling by -33.3k contracts and EUR net-longs falling by -40.1 contracts.
  • Net-long exposure to the US dollar index fell to its least bullish level in 24-weeks.
  • Interestingly, net-long exposure to euro futures also fell, to their least bullish level in 9-weeks.
  • Net-short exposure to CHF futures fell to their least bearish level since September.
  • Traders remained net-long Russian rubles by 7.5k contracts (down from 19.5k end of February) but open interest is its lowest since December 2020.
  • Traders were their most bearish on GBP futures in 11-weeks.
Read our guide on how to interpret the weekly COT report The Aussie saw a sharp reduction in net-short exposure last week, which fell -33.4k contracts – its sharpest move since March 2015. 28.6k short contracts were culled, which was its most aggressive rate of short-covering since March 2020 and 4.8k long contracts were added. A strong commodities rally driven by geopolitics and supply concerns, alongside a hawkish Fed and less dovish RBA) is finally seeing those tired shorts run for cover and helped push AUD bac above 74c. Should we see more hawkish rhetoric from RBA then (dare we say) we could even see AUD back above 80c.

 

NZD futures:

Traders flipped to net-long exposure to NZD futures for the first time in 3-months. And like AUD, we saw a strong reduction of gross shorts (-10.3k contracts) and increase of longs (5.7k contracts). Money markets have fully priced in a further 3 hikes over the next six months with the 6-month OIS rising to 1.75%. And the surge in commodities pricing with global inflation on the rise doing little to dispel expectations of further hikes which remain supportive of NZD.

USD exposure:

Traders were net-long the USD by US $8.7 billion according to IMM (International Money Market, $709 billion of which was against G10 currencies. We saw a sharp drop on exposure to emerging FX, with USD exposure rising by $1.6 billion last week alone, which is its fastest rise since March 2020.

 

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