• Shifting investor sentiment away from the European currencies is the key theme this week, as the CHF position has shifted to net short—typically a bearish signal—alongside a continued modera-tion in bullish sentiment toward EUR and GBP (see top right chart p2). Risk toward AUD was pared back, the inverse of the dynamic observed for NZD, as both saw improvements in sentiment. Mean-while, the bearish JPY position continues to narrow.
• Traders increased bearish positions against CAD, driving the net short position to $6.2bn—closing in on the record $7.4bn short position from April 2013 as sentiment deteriorates on the back of domestic developments. However, the rise in gross longs—albeit to a lesser extent than shorts—presents an early caution sign for CAD.
• Bullish sentiment toward both EUR and GBP moderated w/w—falling to net long $1.6bn and $1.2bn, respectively. EUR bears have added to their positions for four consecutive weeks.
• The JPY net short position remains largest among the currencies, at $14.2bn. However, it is well off the late December, near-record levels at $17.2bn on the back of considerable short covering (see middle right chart p2).
Read the full report: FX Research
Scotiabank