Originally published by AxiTrader
The latest CFTC report shows that large speculators are still covering their US dollar short positions. Considering how much the dollar moved in the past few weeks, it is surprising that we have not seen a larger shift in FX positioning. Furthermore, the recent data releases out of the US confirm that the economy continues to perform strongly. The lack of wage growth means that the Federal Reserve is not under a lot of pressure to increase rates faster, but rate expectations have declined in the Euro Zone and UK, which is keeping the Greenback in demand.
Euro long positions were cut by 10k, bringing net positioning to 121k. The clear break below 1.20 signals further losses are ahead, and a test of 1.18 seems likely in the near-term. Economic data out of the Euro Zone has been disappointing, and rate expectations have been on the decline since the last ECB meeting.
Pound positioning stands at 26k long, a decrease of 11k from the previous week. Given the sharp decline in Cable, pound bulls are showing quite a resilience. Nevertheless, the outlook for the pound remains bearish and further position covering is likely to follow.
Yen net positioning switched back to short again, although the difference is minimal (1k short vs. 1k long previously).
Meanwhile, large speculators increased their bearish bets on the commodity currencies. Australian dollar short positioning increased from 3k to 7k, while Canadian dollar shorts jumped from 25k to 28k. Net positioning for the New Zealand dollar is still positive, but fell from 24k to 17k.
