• Traders are active in the most liquid currencies; with the largest positions reported as shorts in EUR ($10bn) and JPY ($9bn) and the net long GBP ($5bn) and AUD positions ($3bn); most other currencies are held close to flat (bottom left p2). The diverging positions suggest the market is not positioned for a broad USD move but instead for individual currencies to appreciate or depreciate on local developments.
• The long held short CAD position has narrowed to just -$0.5bn. Shorts continue to cover and longs are slowly being added (bottom right p1) – this highlights a significant change in sentiment towards CAD. Once the shorts are fully covered it suggests that CAD will need a catalyst to drive it higher still.
• EUR remains the largest held net short at $10bn, a level around which it has oscillated since the June ECB meeting. The steady bearish sentiment highlights a fundamental challenge to EUR movement from here, as current relative policy provides an offset to expectations of weakness over the longer term.
• A $1.4bn deterioration in CHF sentiment has returned the net position back to short, which at $0.8bn lies at the bottom of its one year range (bottom right p2).
• Investors have cut JPY risk, reducing both longs and shorts this week, as positioning reflects a current environment of uncertainty as geopolitical risk offsets fundamental weakness.
Read the full report: FX Research