INVESTORS PARE CAD & EUR RISK, REDUCE VULNERABILITY

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Data in this report cover up to Tuesday Dec 20 & were released Friday Dec 23.
• Post-Fed positioning adjustments were positive for CHF, EUR and GBP, negative for JPY and gold, and mixed for the growth-sensitive commodity currencies CAD, AUD and NZD (see table below). G4 currencies remain the largest held net short (bottom left p2), led by EUR (-$10.1bn), JPY (-$8.0bn), and GBP (-$4.6bn). The aggregate USD long remains relatively muted on a historical basis.
• Investors have been paring CAD risk for most of November and December, delivering sizeable reductions in both long and short positions. The most recent week delivered an impressive 10.1K narrowing in the net short, its greatest w/w improvement since early February. AUD sentiment has deteriorated for five consecutive weeks and has eroded the net long to its lowest level since early July. The move has been largely driven by a decline in longs and short positioning appears relatively muted.
• Investors have also been paring EUR risk for most of the past two months, steadily reducing both long and short positions since late October The net -$10.1bn position remains the largest held net short, despite an impressive $8.9bn narrowing since November 1. The positioning adjustment is even more remarkable in the context of EUR’s decline from the 1.10 area.
• The deterioration in JPY sentiment remains the most remarkable  with a $16.6bn swing from its near record net long position as of October 4 and current status as the second largest ($8bn) net short. Gross longs remain elevated and vulnerable.
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