• The FX environment is not one of a broad USD trend but instead of domestic stories that are driving currencies. Traders are bearish EUR, JPY and CHF and bullish CAD, NZD, MXN, AUD and GBP. However this week’s data is interesting as it provides the first warning signal for EUR bears and GBP bulls.
• CAD’s attraction is growing, with investors adding to the net long position, driving it to $1bn. However the net long AUD position narrowed, but remains elevated at $3.4bn. There was likely a reallocation of AUD longs into CAD; however the core take away is that near‐term sentiment remains bullish the commodity currencies.
• EUR bears made no change to their extended $10bn short position; however the lack of a further build is a warning signal that downward momentum could be slowing.
• GBP longs grew nervous and took the opportunity to close out some of their exposures. The net long GBP position remains the largest at $4.5bn but the shift this week warns of a potential change in sentiment.
• JPY bears continue to maintain a fairly constant short position, even in the face of substantial JPY strength.
Read the full report: FX Research