• Key developments in this week’s report include an ongoing build in EUR and JPY shorts, a paring back in CAD and GBP risk, and an an increasingly bullish turn in MXN and CHF sentiment. The elevated aggregate long USD position is largely composed of the EUR and JPY net shorts, with most of the remaining positions relatively small — long AUD, GBP, MXN, NZD, and CAD, and short CHF.
• JPY sentiment has deteriorated, with bearish positioning having built to levels not seen since January and likely contributing to the decline in spot toward its 2014 lows. This deterioration in sentiment suggests a waning impact from geopolitically-driven short
covering, providing for a re-focus toward fundamentals.
• EUR sentiment continues to deteriorate with a $24.8bn net short position representing the widest level since July 2012. We note that the pace of the gross short build has decelerated considerably, however it is too early to call an end to this trend.
• For CAD, bullish sentiment has moderated for the fourth consecutive week. However, we feel that a more interesting development is the paring back of both gross long and short positions, suggesting that investors are reluctant to commit to a bias so long as CAD consolidates around the mid-point of its YTD range. For AUD, investors appear to be increasingly comfortable in maintaining a bullish bias, with the net $ position rising to its highest level since April 2013.
Read the full report: FX Research