The latest IMM data cover the week from 13 to 19 May 2015.
Investors continued to liquidate USD longs and cover EUR shorts in the week ending 19 May, thus extending the tendency seen since late March for positioning to become less stretched short EUR/USD . However, the moves remain relatively small drops in an ocean of USD bulls and the market is still tight on EUR shorts and USD longs from a historical perspective. That said, price action following last week's upside US CPI surprise suggests that there is now more room to add USD longs than was the case just a few weeks ago. Indeed, we stress that IMM data remain a proxy of how the global (largely OTC) FX market is positioned. When US data start to surprise on the upside (as we look for for the remainder of Q2) positioning should not in itself be an obstacle for the USD to strengthen further.
JPY and GBP shorts were shred alongside EUR shorts last week, suggesting the unwinding of USD longs is supportive not just of the single currency at present . Indeed, speculators appear to be increasingly buying into our call that Bank of Japan will not ease further and that the Bank of England will shadow the Fed and deliver a first rate hike late this year. On the whole, positioning is now broadly neutral on JPY and less stretched on short GBP than was the case at the start of the year. The former underlines the potential for USD/JPY to move higher as Fed hikes come closer.
Large moves in commodities positioning last week with both oil and gold seeing longs added on a significant scale , taking positioning from stretched on shorts to the neutral region. These moves were mirrored in more bullish bets on commodity currencies such as AUD and CAD. We note that positioning in grains is stretched short on wheat, corn and soy alike, underlining the upside potential for these should the forecast of El Nino weather returning disrupt production this year, see Research Commodities: El Niño returns - grains and soft commodities at risk.
To Read the Entire Report Please Click on the pdf File Below