Investors Pare Back Positions In EUR And GBP

As indicated by the latest CFTC data, investors decided to pare back positions in both EUR and GBP ahead of central bank meetings last week. It is this bearish underlying sentiment which resulted in an aggressive short squeeze after Draghi indicated that there are signs of stabilisation, while on Friday, analysts at Goldman Sachs issued a buy recommendation on EUR/USD with target of 1.3700.

However it remains to be seen whether markets are ready to turn positive on the currency at the time when there is still a high risk of a renewed speculative attack on sovereign states. In terms of technical levels, supports are seen at 1.3200, 1.3172, which is the 38.2% retracement of the 1.2998-1.3280 move and then at the 30-DMA line at 1.3148. On the other hand, resistance levels are seen at 1.3368/85 and then at 1.3486.

GBP/USD
According to the latest CFCT data, investors remained somewhat cautious on GBP and EUR. EUR fell back into net short territory at –USD 1.3bln following a USD 2.2bln decline and for GBP, there was a fall of USD 1.1bln and hence it continues to be held net long USD 2.6bln. Going forward, the pair is set to remain a by-product of the newsflow relating to the eurozone, which despite the last week’s rally that saw EUR/USD top the 1.3300 level, risks falling off the proverbial cliff yet gain. In terms of technical levels, supports are seen at 1.6005, 1.5992 and then at 1.5988. On the other hand, resistance levels are seen at 1.6200/55 and then at 1.6275 which is the 30-day upper Bollinger level.

USD/JPY
The so-called Abe trade continues to play out and as evident in the latest CFCT report, sentiment for JPY remains bearish, with a net short position of USD 10.6bln. Similar to last week, broad based JPY weakness is again expected to be evident as markets continue to price in further policy actions by the BoJ. In terms of technical levels, supports are seen at 88.48/02 and then at 87.87. On the other hand, resistance levels are seen at 89.35/50 and then at 89.98.