The latest IMM data cover the week from 17 to 24 November 2015.
IMM positioning data released yesterday reveal the fifth consecutive week of bearish EUR builds sending speculative positioning in the single currency to the most bearish level since early June . The re-acceleration in bearish single currency bets has been driven by a combination of an overall bullish build in the USD with the first Fed hike looming (see next paragraph) and increased speculations that the ECB will ease monetary policy aggressively on Thursday. We expect Draghi to exceed market expectations and to deliver a 20bp cut to the deposit rate, introduce a two-tier deposit rate system, to extend QE to December 2016 and to expand the monthly purchases to EUR75bn. On the back of this we expect EUR/USD to edge lower short term and expect the cross at 1.02 in 1M and 3M. We do, however, not expect the cross to reach parity and we expect the fundamentally heavily undervalued cross to edge higher over the next year as relative rates lose importance - amid stretched positioning - and as the relative current account difference is now back at 2004-2006 levels (when we last saw significant USD weakness). We target EUR/USD at 1.06 in 6M and 1.16 in 12M.
Last week was characterised by an overall build in long USD-bets with investors adding to their exposure against all G10 currencies in the report with the exception of JPY and AUD. Aggregate USD-bets are now back at March levels, cf. page 6.
The change in AUD bets likely reflects diminished expectations of a dovish Reserve Bank of Australia at the 1 December meeting and as we now know the central bank indeed was very balanced maintaining the previous rhetoric as to the value of the AUD. We still expect AUD/USD to edge lower in the coming months as relative terms of trade and a looming Fed hike will weigh on the cross. We do not expect AUD/USD to collapse as (i) long term fundamentals, (ii) already aggressive pricing of monetary policy divergence, (iii) China stabilisation and (iv) stretched short speculative positioning will limit the downside potential. We forecast AUD/USD at 0.71 in 1M, 0.69 in 3M, 0.68 in 6M and 0.68 in 12M.
In commodities, speculators significantly added to their bearish oil bets returning non-commercial positioning in the black gold to levels below the 10th percentile.
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