The latest IMM data covers the week from 29 April to 5 May 2015.
Aggregate USD positioning dropped last week, with USD33.2bn outstanding as of last Tuesday compared with a peak of above USD50bn late 2014. This suggests that USD positioning has come off the peaks seen earlier in the year when 'long USD' was one of the key global deflation trades at the start of the year. We do think, however, that the liquidation of USD longs may have further to run in coming weeks - not least if we are right in seeing US retail sales come in below expectations. But we maintain that USD strength will return on a 3-6M horizon, see FX Strategy: Deflation deceleration - an early warning for EUR/USD , 7 May 2015.
That said, EUR shorts were indeed covered during the latest correction - just not to the extent one may have envisaged given the move higher in EUR/USD from below 1.10 to around 1.12. If oil prices take another tour higher, e.g. testing the USD70/bl-level for Brent, there should be room for more EUR shorts to be unwound in the near future. We look for EUR/USD to test new levels on the upside in the near term.
One reason for the minimal drop in the value of aggregate USD longs was that more JPY shorts were added last week. While we still look for USD/JPY to move higher as Fed hikes draw closer, we closed our long USD/JPY recommendation last week for a small profit, see Danske Bank FX Trading Portfolio: Take profit on long USD/JPY , 5 May 2015.
Finally, speculators became more bullish on CHF and AUD. For the latter this clearly derives from a less dovish RBA last week, but positioning is likely to be reversed at least partly in a more bearish direction again after a soft Monetary Policy Report later in the week. Somewhat surprisingly, non-commercial positioning in sterling actually turned less bearish ahead of the election despite the outlook (at the time) for a hung parliament. With the election dust settling we see GBP supported by the outlook for a first Bank of England hike in Q4.
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