The latest IMM data covers the week from 17 March to 24 March 2015.
• IMM positioning data released on Friday revealed that speculators are again looking for renewed EUR weakness. In fact, with the considerable bearish positioning in the week to 24 March, non-commercial positioning in the EUR is at its most bearish level since summer 2012. The buildup in short EUR positions is also the main driver behind the expansion in bullish aggregate USD positions (see page 2) which has returned non-commercial positioning in the greenback to historical levels above the 98th percentile. Fundamentally, we believe that the stage is set for another move lower in EUR/USD and that the renewed acceleration in speculative positioning remains a supportive factor. Specifically, we expect the next round of sustained EUR/USD weakness to be fuelled by better US data which we are likely getting closer to with this week's US non-farm payrolls (due on Good Friday, 3 April). We look for a moderate headline figure (230k) and if earnings prove healthy as well, this should confirm that the labour market will not be an obstacle for the Fed to start hiking rates over the summer, paving the way for the next round of USD strength.
• Notably, speculative CHF positioning has returned to absolute net short territory after the previous week’s brief visit to positive territory. On a historical perspective, however, positioning remains neutral, suggesting that risks from a positioning perspective are close to evenly balanced. On the other hand, we see risks as being highly skewed towards a weaker CHF in the coming months. With EUR/CHF just below 1.05, we are around the level where the Swiss National Bank (SNB) should be alert to further CHF strength while the recent drop in USD/CHF only aggravates the situation. The SNB has to act to avoid deflation becoming further entrenched in the Swiss economy and at current levels we expect the SNB to fight ‘swissie’ strength via intervention, rate cuts and/or asset-purchase targets (see FX Forecast Update).
• In commodities, speculators added net longs in oil for the third consecutive week sending non-commercial positioning to levels last seen in February (64th percentile). In the short term, we see limited upside potential to the oil price as the market is still seeing excess supply, the Yemen situation is calming and as speculation over the first steps in an Iranian nuclear deal will likely continue to weigh on the oil price.
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