Earlier this week, as the loonie was in the midst of its post-rate-hike rally, former trader Kevin Muir decided it was time to say “sold to you” to all the newly-minted CAD bulls.
Essentially, Kevin was laughing. Why? Simple: because specs had gotten burned badly. After going the most net short CAD on record in May, the loonie did nothing but rally:
I mean look, we all know spec positioning can be a contrarian indicator, but – that was bad.
One thing to note here is that we live in a world where central bankers have put the “forward” in “forward guidance.” Markets are so sensitive to policymaker rhetoric that it’s gotten to the point where you have to telegraph the telegraphing – witness the news we got Thursday about Mario Draghi being scheduled to address Jackson Hole in August for the first time in three years. They’re now announcing the pronouncements ahead of other announcements.
So by today’s absurd standards, the BoC didn’t give the market much warning about this week’s hike. Consider how this unfolded as recounted by Bloomberg’s Luke Kawa:
Well with the release of the latest CFTC data, we learn that a long, and exceedingly painful chapter for CAD shorts has (almost) come to an end.
In the week through Tuesday (so one day before the BoC), leveraged accounts trimmed their net CAD short by 30,375 contracts to just 9,581.
“CAD net shorts fell by $2.4bn and stood at just $0.7bn going into the Bank of Canada meeting on Wednesday,” Goldman notes, adding that “CAD positioning added $10bn in net shorts between the beginning of March and the end of May, but has reversed roughly two thirds of that move in the past six weeks.”
In short (no pun intended), the entire record short from May was nearly covered through Tuesday:
And as for anyone who was still hanging around bearish going into Wednesday, well, sorry about that…
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