The week ending 15 April generally saw very limited changes in IMM positioning: EUR shorts were reduced marginally but remain in stretched territory as has been the case since mid 2014. Similarly, JPY shorts were reduced as investors are increasingly losing faith that the Bank of Japan will be willing to add to an already aggressive easing scheme despite a period of weak data.
We maintain that both the EUR and the JPY are set for another round of downside vis-a-vis USD as Fed policy normalisation draws closer. But, from a positioning point of view, our bearish EUR view is clearly challenged - still, the single currency will in our view continue to feel the effects of the ECB's QE for some time still. In contrast, JPY positioning is overall neutral, hence making the potential for JPY softness greater, everything else equal. USD/JPY upside is however set to be driven almost solely by USD strength as we do not see much in the way of outright JPY negative factors for now.
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