The latest IMM data covers the week from 25 August to 1 September 2015
IMM positioning data released on Friday reveal that for the first time in three weeks speculators added bearish EUR positions . From an historical perspective, the change was insignificant but marks a return of EUR/USD bears after the two-week record short covering in August, which contributed to sending the cross above 1.17 temporarily. Importantly, data was collected before Thursday's dovish ECB meeting and, consequently, we expect the overall level to have become more bearish than the 21st percentile released in the report. We maintain the view that more downside is in store for the cross in coming months and that relative monetary policy will be the driving force sending the cross lower towards our 3M forecast of 1.10. However, in the very short term, the cross is heavily influenced by risk sentiment as the EUR's status as a preferred funding currency has sent EUR-cross risk-asset correlations to record-high levels. As we expect stock markets to remain nervous for some time, this leaves EUR/USD vulnerable to the upside in an environment where the overall global policy response is fairly muted.
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