Non-commercial investors turn short CAD

The latest IMM data covers the week from 24 to 31 August.

IMM data collected prior to positive US data: Non-commercial investors reduced their exposure to risk-sensitive currencies according to the latest IMM report, which was, however, collected prior to recent positive US data. Short EUR positions were extended to 10.6% of open interest, and long positions reduced in the commodity currencies AUD, CAD and NZD. Wednesday's stronger-than-expected ISM manufacturing report, which triggered a rebound in risky assets, is however likely to have seen a reversal of positioning flows – and extended further by Friday's positive non-farm payrolls report.

USD/JPY upside risks persist from stretched positioning: A further easing of monetary policy in Japan was not enough to see speculative investors unwind their long JPY positions, nor was it enough to keep JPY from appreciating further. Given the Japanese election, our Asian economists see a high probability of further monetary steps to stem JPY appreciation pressures. Given the biased market positioning, these measures could trigger an accelerated move higher in both USD/JPY and EUR/JPY should more aggressive action, than the latest monetary easing, be taken.

Speculative investors turn short CAD: The unwinding of long CAD positions has continued and non-commercial investors are now marginally net short CAD for the first time since May 2009. With markets pricing only a 56% probability of a 25bp rate hike at Wednesday's BoC meeting and speculative investors now short CAD, the upward potential in USD/CAD from a rate hike is likely to have increased

Danske Bank
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