Non-commercial investors add to short USD positions

The latest IMM data cover the week from 27 July to 3 August.

Non-commercial investors added further to short USD positions, which have now reached USD17bn. The dollar has lost close to 10% since its early July peak and with Friday’s disappointing US labour market report (released after the collection of IMM data) positioning is likely to have turned even more against the dollar. As short USD positioning becomes more stretched so does the upside risk to USD from a potential position squeeze.

Coinciding with the strong rebound in EUR/USD over the past month speculative investors have unwound their short EUR positions. EUR positions are now back at neutral levels (net shorts at 3% of open interest) for the first time since December last year.

Net long positions in the commodity currencies (AUD, CAD and NZD) have become even more stretched with NZD looking most vulnerable with net longs at 62% of open interest. A position squeeze, potentially driven by oil prices correcting fast back below USD80 per barrel (watch Wednesday’s IEA oil market report), could see AUD, CAD and NZD correct lower.

Net long JPY positions have now reached 36% of open interest despite the current strong JPY level fuelling speculation in the market about the potential for interventions by the Bank of Japan.

Danske Bank
http://www.danskebank.com/danskeresearch

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