• Bearish position building in EUR and JPY dominated the shifts in investor sentiment this week, as market participants prepared for high level events and releases in the US. Commodity currencies CAD, AUD and NZD were relatively quiet—though we note a paring back in risk appetite as both long and short positions were reduced. Meanwhile a reverse dynamic was observed for MXN as investors appeared comfortable adding to risk with a build to both sides. Investors are long AUD, MXN, GBP, CAD and NZD, with all but GBP close to their most bullish levels over the past year (p2 bottom right). EUR, JPY and CHF are held net short.
• A modest build in bullish CAD sentiment to $2.1bn, its largest net long position since February 2013, obscures a paring back in risk, as we continue to highlight the risk posed by diverging sentiment (long up $1.8bn in July) in relation to spot (down 2.1% in July).
• EUR sentiment has deteriorated, with a second consecutive week showing a material build in bearish sentiment—widening $3.2bn on a w/w basis. The $18.1bn net short EUR position is now at its widest since mid-2012, though still well shy of the June 2012 record short at $33.5bn position.
• Market participants appeared comfortable adding to GBP risk in the week ending July 29, given the rise in both long and short positions. However we suspect that GBP longs were likely shaken amid a recent acceleration in the pace of decline in spot. We await next week’s sentiment report for confirmation of this.
Read the full report: FX Research