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Positioning update: IMMs and bank FX flow highlights

Leveraged funds’ net EUR short position moderated last week, falling to -60,060 contracts on November 1 from -76.512 on October 25, revealed the latest Commitment of Traders report.

Last week’s report coincided with the relatively successful conclusion to the EU summit, which fuelled a strong EURUSD rally, breaking $1.40 and hitting an eight-week high. The rally was firmly reversed after Greek prime minister George Papandreou’s shock call for a referendum, but IMM positioning suggests the initial post-summit euphoria offset it.

The market still seems to be asymmetric in its reaction to news, analysts observe. Positive headlines have seen strong rallies, while the euro seems relatively resilient to negative news.

The latest report also shows investors more than halved their net long JPY exposure in the wake of the Bank of Japan’s intervention to weaken the yen. JPY net longs fell from 54,147 on October 25 to 25,904 on November 1.

Bank's flow tells a different story

The euro saw heavy selling among banks that spoke with euromoneyfxnews with UBS recording its biggest weekly volume in EURUSD for 2011 "though cumulative flow was not as destructive for the currency".  Barclays Capital said it also saw strong euro selling from asset managers and hedge funds, as the announcement of a Greek referendum raised the prospect of a disorderly Greek default and an outright exit from the currency union.

Contrary to the CFTC's IMM data, which includes trading only until the tuesday of last week, JPY was heavily bought according to UBS and Morgan Stanley internal flow monitors.

Bank analysts said asset managers, corporate and private clients drove the flow towards USDJPY downside which was also the case for EURJPY in typical post-intervention fashion.

Asset managers were USDJPY sellers from Monday through Wednesday although the pair found very firm support at 78.00, failing to make sustained breaks towards previous record lows. Sources suggest there had been some small-scale stealth intervention during the week, given that all of USDJPY’s gains evaporated within three days when the BoJ last intervened in August.

Data from the Bank of Japan’s own accounts, however, dispute any such claim.  Either way, USDJPY has traded in a remarkably tight range following the latest bout of intervention.

 USDJPY - Different reactions following intervention
 Source: Bloomberg

USD longs remain stable

USD net longs increased modestly from 68,435 on October 25 to 71,948 on November 1. Investors bought a net amount of $0.81billion last week. The market has been long USD since September 13 with aggregate long USD positioning now standing at $10.1bn.

The report indicates the market is long USD against every currency except for AUD, JPY and NZD.

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