IMM: EUR shorts close in on record; USD longs near multi-year highs
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Foreign Exchange

IMM: EUR shorts close in on record; USD longs near multi-year highs

Speculative positioning in non-USD currencies on the CME has moved to the largest short since mid-January, according to the latest Commitment of Traders report issued by the CFTC.

The net long USD position jumped to $20 billion, close to the largest dollar long over several years. Short positioning in EUR and JPY now make up the bulk of non-USD shorts with a combined notional value of more than $26 billion.

Short positioning in EUR had been on a downward trend for the past month, but last week jumped back to near multi-year highs as eurozone contagion fears re-emerged. Non-commercial traders net sold nearly 22,000 contracts, bringing the overall net EUR short to more than 100,000 contracts with a notional value of $16.5 billion.

EURUSD spot is hovering around $1.30 – the bottom of its recent trading range – and the sharp rise in EUR shorts might suggest limited scope for another shift in positioning to drive further moves lower in spot.

However, looking at Citi’s PAIN index on hedge fund positioning suggests it might be premature to assume EUR positioning will impede additional spot losses, says Todd Elmer, currency strategist at Citi.

Citi’s PAIN index on EUR positioning has failed to track the International Monetary Market (IMM) data, remaining in slightly positive territory.

EUR IMM net speculative positioning in vs Citi PAIN index
Source: Citi

“Since PAIN covers a broader market cross-section than the IMM, this suggests the recent selling may have been concentrated among shorter-term players such as CTAs,” notes Elmer. “Should EUR selling spread across other market segments, some additional pressure could be seen.” In contrast to EUR positioning, the net short in JPY was largely unaltered last week, though it remains sizeable at 66,000 contracts, equivalent to more than $10 billion.

Concerns surrounding Europe also caused GBP traders to build short positions by a further $1 billion, bringing the net short to $1.9 billion – the third largest after EUR and JPY.

Of the G10 currencies, CAD and AUD continue to have the largest net long positions against the US dollar, though both suffered declines last week as risk aversion rose.

CAD saw both long and short investors reduce exposure, causing the net long to fall by $0.2 billion.

The AUD suffered a greater decline of more than $1 billion as investors abandoned bullish positions, as short positions rose. Stronger jobs data, however, is likely to have since countered some of the move.

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