Remarkably stable positioning given market volatility

The latest IMM data covers the week from 8 November to 15 November.

Stable USD longs: Considering the still-high volatility in financial markets and the considerable event risks related to the European debt crisis, FX market positioning has been remarkably stable. Non-commercial investors remain significantly long the dollar, short the euro and modestly long the high-yielding commodity currencies NZD and AUD.

Still stretched EUR shorts: Short EUR positions were built further last week, as EUR/USD corrected back towards 1.35 and net short EUR positions now stand at 31% of open interest, which must be considered stretched. However, in late September, short positions were built to near 40% and there is thus probably still modest room for short building to take EUR/USD lower in the near term. Strong technical support is found around the 1.34 level but, given the relative monetary policy outlook, we maintain our 1.30 target in three months.

Investors turn short CHF again: Net CHF positions have been turned from modest long to modest short positions in the week to 15 November, coinciding with a gradual move higher in EUR/CHF to around 1.24. The change in positioning shows quite well what is driving the Swiss franc at the moment. It is not relative fundamentals – then CHF should be trading stronger – but rather speculation about the potential for a hike of the 1.20 floor. As local analysts have started discussing the possibility of a hike of the floor as soon as the December monetary policy meeting, the CHF has weakened.

Danske Bank
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