Looking at this week's COT report, extremes continue in long crude oil and short Swiss franc positions. This is illustrated below:

Source: CFTC, MarketsNow

Notable extremes are bolded, and are highlighted when speculator positioning is more than two standard deviations above historical trailing 1-year and 3-year trends.

Other notable changes include a build-up of long euro positions. As strong economic growth in the Eurozone continues, euro traders remain optimistic regarding the common currency. Speculators are also adding to Japanese yen positions as the probability of reflation becomes increasingly doubtful. As we wrote earlier in the week, inflation looks set to decelerate as the commodity rally runs out of steam.

Strong growth + weak inflation = euro bull market

Throughout the euro's short history, the currency has strengthened when the global macroeconomic environment has been supportive. This is particularly the case when global GDP growth is accelerating and US inflation is weak. As weak inflation forces the federal reserve to adopt a more neutral policy, the euro is a big beneficiary from lower US rate hike expectations (which drives the dollar lower). While the prospect of accelerating inflation was looking more likely earlier in the year, flat or falling commodity price indices suggest a more neutral outlook going forward.

In terms of growth, recent figures from the US, Eurozone and Japan all suggest a continuation of accelerating GDP growth. While data from China and commodity producers (e.g. Australia) have been less hopeful, it's still too early to call a global downturn.