• The CFTC release highlights several themes: 1) With a net long $29bn USD position, traders are bullish but the bulk of this is in short EUR (-$26bn) and short JPY ($12bn) positions with traders clinging to their long CAD, AUD, NZD, MXN and GBP; 2) The pattern in spot commodity currencies is diverging from the net position (as spot has dropped yet positions remain net long – see charts for CAD, AUD and MXN); 3) Overall changes this week were relatively small, suggesting that some traders are comfortable holding onto positions even into next week’s risk events (Fed, Scotland and inflation).
• EUR – the net short position was pared back slightly to $26bn, most likely on a bit of profit taking as the currency stabilized this week.
• GBP – the net long GBP position more than doubled increasing to $3bn. In the face of next week’s Scottish vote it warns that some might be positioning for a ‘no’ vote, which help support a rise in GBP.
• The net long CAD position increased to $1bn this week, but only on the back of short covering; while AUD’s net long is still the largest but declined to $3.8bn. In both commodity currencies traders were likely caught wrong footed by the late week depreciation (not captured in this data set) causing more vulnerable longs to be shaken out of market and leaving it slightly more balanced.
Read the full report: FX Strategy