Euro and its COT report. In this week's report (January 18-24th) there were some major moves made by the commercial traders in the 10 year Treasury Futures.
Below is a chart of the 7-10 Year Treasury note exchange traded fund (NYSEArca:IEF). There was a long term multipoint trendline that had been broken down and it has since rallied to the backside of the trendline since that cutoff date for this COT report.
However, here is where it gets interesting. In this COT report, the commercials for this period actually increased their long positions by buying 118,229 contracts, and reduced their short positions by buying in 69,966 contracts. That's a net increase of 188,195 contracts to the long side for the week. Open interest only went up 20,012 contracts during that week. This is an incredible display of stealth demand from the commercials in the face of a selloff and a significant trendline being broken down.
What in the world do these traders know about the fundamentals for U.S. Treasuries to soak up that supply so aggressively? Is there a massive deflationary event about to happen? What has happened to these positions since price
has rallied? Are the commercials still buying?
I don't know how they're so confident since the commercials are bullish on the Euro Currency.
In the COT report for the Euro (NYSEArca:FXE), the commercials increased their Euro long positions by 10,181 contracts and decreased their short positions by 250 contracts this week as well. Commercials are currently long 248,435 contracts and short 50,819 in the Euro, nearly 5 to 1 bullish.
At this time, I am beyond eager to see this upcoming Friday's COT report since we had the intense price rally of the past few days in the 10 Year Treasuries and the Euro. I certainly plan on posting my observations and/or opinions afterward.
Related: ProShares UltraShort 20+ Year Treasury ETF
(NYSEArca:TBT), iShares Barclays 7-10 Year Treasury Bond Fund (NYSEArca:IEF), ProShares Short 20+ Year Treasury ETF (NYSEArca:TBF), iShares Barclays 20+ Year Treas Bond ETF (NYSEArca:TLT), Barclays 1-3 Year Treasury Bond ETF (NYSEArca:SHY).
Written By Scott Pluschau From ETF Digest