Bank of America’s latest positioning analysis indicates Commodity Trading Advisors (CTAs) have maintained heavy short positions in U.S. Treasury futures, with elevated yields reducing the urgency for near-term short-covering. The stability in these positions contrasts with broader FX positioning, where a recent dollar decline is pressuring slower-moving trend followers to reduce their stretched EUR/USD short bets.
The bank’s model suggests EUR/USD could target a range of 1.1691 to 1.1853 from a Friday reference of 1.1679, reflecting potential short-covering flows if the dollar’s weakness persists. Elsewhere, CAD shorts faced pressure during the week, though stop-out risks remain limited, while trend followers continue to hold long positions in MXN/USD, supporting the currency’s recent performance.
CTA equity positioning has climbed back to pre-Iran conflict levels, with faster-moving models poised to add exposure in U.S. and Japanese equities. European positioning remains more stretched, sitting in consensus long across trend speeds. A sustained bearish price path could trigger global equity unwinds exceeding $100 billion, primarily driven by medium- to longer-term trend followers.
Bank of America’s index acceleration thresholds, which act as selling triggers, include a 3% decline in the S&P 500, a 5% drop in the Nasdaq-100, Russell 2000, and Nikkei, and a 4% fall in the Euro Stoxx 50. In commodities, oil prices rose on renewed Iran tensions, prompting medium- and longer-term trend followers to add to long positions. Gold extended its rally, though CTAs are not yet meaningfully involved after recent short-covering flattened positioning. Trend followers remain stretched long in copper and soybean oil.
Options and hedger gamma data show S&P 500 hedger gamma at $3.2 billion as of Wednesday, down modestly from mid-week levels following positive gamma expiries. Monthly option expiry accounted for $0.6 billion of total gamma, with hedgers net long approximately 5,000 contracts between 7,550 and 7,750. Options expiring during the Jackson Hole conference on August 27-28 contribute roughly $2.8 billion to positive hedger gamma for next week’s expiries, while hedger vega positioning beyond one month remains net short, matching the prior week’s levels.
