The latest IMM data cover the week from 2 to 9 December 2014.
• IMM data released last Friday revealed the largest single week EUR short covering since the start of September this year. The move reflects Draghi disappointing markets at the ECB meeting on 4 December and a general reduced appetite for USD (see next bullet). This week’s move has sent non-commercial EUR positioning to the 12th percentile – the least bearish level since July this year.
• As the table on page 2 shows, speculators reduced their aggregate USD exposure in the week to 9 December worth a total amount of USD4.8bn against all other major currencies included in the report. The move was in particular driven by short-covering in EUR, JPY, GBP and CAD. The reduced appetite for USD reflects profit taking and risk reduction ahead of year-end. While investors’ appetite for USD exposure is likely to remain low in the last couple of weeks of 2014, the USD might gain a little support this week as we expect the Fed to become a bit more hawkish in its communication in connection with the FOMC meeting on Wednesday. Fundamentally, we still expect the USD to outperform in the coming months especially against the EUR and JPY, and we still like to enter 2015 with a long USD position as we believe that the current softness will be reversed in the beginning of the new year. We are long USD against JPY and CHF as two of the four open FX Top Trades for 2015 in Danske Bank’s FX trading portfolio.
• This week’s data show that speculators again added bearish AUD bets (see page 2). The effect on ‘percentage-of-open-interest’, however, was reversed as commercial investors markedly increased their AUD hedging (part of the denominator). Noteworthy, positioning has historically not been a barrier for more AUD/USD downside and last week we lowered our AUD/USD forecast on an expectation of the RBA cutting the interest rate in March 2015 (see AUD/USD forecast update, 11 December). We now target the cross at 0.82 in 1M and 0.81 in 3M.
• In commodities, speculators reduced their long oil bets sending non-commercial positioning in the black gold to the 38th percentile – the least bullish level since February 2013. While this suggests a higher sensitivity of the oil price to the upside, there are still no signs of a bottom for the oil price and it is unclear how low it can go in the short term (see The oil price plunge in perspective – déjà vu no. 1, 12 Dec).
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