The latest IMM data covers the week from 8 March to 15 March. Explaining the dollar’s fading safe-haven flavour. One of the many surprises last week was the resilience of EUR/USD at a time when global risky assets were selling off.
Positioning offers part of the explanation. Despite a spike in market uncertainty going into last week, non-commercial investors did not cut back on net long EUR positions as a share of open interest – now at 24%. In other words, the resilient EUR/USD last week can partly be explained by speculative investors’ hesitation to cut back on long EUR positions this close to the April ECB meeting (where a rate hike is still expected). It also means, however, that positioning remains a downside risk factor on EUR/USD – and will likely become even more so as we approach our three-month 1.46 EUR/USD forecast.
JPY appreciation not only due to repatriation flows. The latest IMM report was compiled the day before the yen appreciation accelerated and USD/JPY collapsed to set a new 76.25 all-time low. The report shows a build-up in net long JPY positions to 26%, indicating that non-commercial positioning may indeed have been front running potential repatriation flows and in turn contributing to the spike in the JPY. Next week’s IMM report will show if long JPY positions have survived (or rebuilt) following the coordinated G7 intervention to weaken the yen.
Position unwinding in NZD, GBP and CAD. Notwithstanding the resilient EUR/USD, short USD positions were scaled slightly back. This was not least the case for NZD, GBP and CAD, where net long positions were reduced by up to 33% of open interest. This also leaves potential for a rebound in these currencies, however.(DB/AFX/HQM)