Speculative investors reduce long JPY positions

The latest IMM data covers the week from 13 July to 20 July.

During the week covered by the data JPY longs were reduced, following a four-week period in which longs had been built up. The reduction may have been sparked by profittaking, as the past week saw a halt to the previous downward trend in USD/JPY.

Speculative investors added to net short US dollar positions for another week. This reflects further unwinding of EUR and GBP shorts, as well as a build-up in long AUD, NZD and MXN positions. The shift in speculative investor interest toward the US dollar has coincided with a further decline in the effective USD index, although the fall has since stopped at levels just above 82.

Speculative investors continue to reduce short euro positions, reflecting a general improvement in sentiment toward the single currency. While the market awaited the results of the stress test, EUR/USD broke above 1.30 for the first time since early-May on a string of strong European data releases. Although speculative investors are still short in terms of euros, positioning risk has arguably become much more two-sided.

The largest build-up in long positions versus the USD was seen in AUD, with an USD800bn increase, although as a share of open interest, this was surpassed by the NZD. With long positioning close to 50% in both NZD and MXN, significant downside positioning risks persists. The CAD was unable to capitalise on an increase in the Bank of Canada's policy rate and long positioning decreased.

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

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