The USD is being traded not as a broad US‐centric theme butinstead with the focus on the local domestic stories. Accordingly sentiment is favouring a fairly mixed USD performance. The net USD long stands at $16bn, down week‐over‐week but well withinits three month range.
Bearish sentiment is focused on CAD, AUD and JPY; however it isonly building against CAD; with the net position widening thisweek to ‐$6bn. For CAD, this is historically extreme but grossshorts are still being added to, suggesting that momentum isstrong and sentiment will continue to weigh on CAD. Both the AUDand the JPY positions are bearish but the trend is fairly neutral—these net short positions are at ‐$4bn and ‐$9.7bn, respectively.
Bullish sentiment is building towards EUR, GBP, NZD and gold;with all of these net longs gaining ground this week. The net long EUR position is at $2.7bn but has flip‐flopped repeated over thelast few months, indicating a lack of conviction. For GBP (net long$1.2bn), it has been a relatively slow and steady build and investors continue to add to their long holdings. The build in gold is likelya reflection of risk aversion, monetary policy, demand and risingspot prices.
CHF is held essentially flat– suggesting that speculative interest isplaying only a minor role in CHF returns.
Read the full report: FX Research
Scotiabank