FX COT Update: JPY Positioning Turns Net Long Again Despite Dovish BOJ Developments

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EURUSD

JPY Positioning Turns Net Long Again EURUSD

Non-Commercials reduced their net long positions in the Euro last week, selling 5k contracts to take the total position to 115k contracts. EUR upside has now been net sold for each week over the last month as the market reacts to a downturn in eurozone economic data and a more cautious tone by the ECB subsequently. Speaking at the bank’s last rates meeting, ECB chief Draghi acknowledged the dip in data but said the bank remains confident that the eurozone economy will move back up to the bank’s inflation target over the horizon term. However, the market was left disappointed as Draghi also said that the bank remains willing to extend its asset purchase program beyond September if necessary, with rates due to stay low well beyond the completion date.

GBPUSD

JPY Positioning Turns Net Long Again GBPUSD

Non-Commercials reduced their net long positions in Sterling last week selling 3k contracts to take the total position to 6k contracts. GBP too has now been net sold for the month as the market has adjusted its US Dollar view higher in line with higher yields and rising rate hike expectations. Alongside an upgraded USD view, sentiment towards GBP has now drifted lower following a more dovish meeting from the BOE this month. In line with earlier comments made by BOE governor Carney, the BOE kept rates on hold, citing weaker domestic data but also increased uncertainty around Brexit. While the bank reiterated its intent to raise rates further this year, the market is feeling let down by Carney, reflected in the continued position squaring we’re seeing.

USDJPY

JPY Positioning Turns Net Long Again USDJPY

Non-Commercials reversed their net short positions in the Japanese Yen last week, buying 9k contracts to take the total position to 4k contracts. JPY positioning has been particularly volatile over recent weeks as the market grapples with opposing forces. JPY positioning turns net long again as the fluctuation in the relationship between the US and China, regarding the ongoing trade dispute, has been causing an ebb and flow in risk sentiment which has been affecting JPY flows. Alongside this we have seen a dovish shift in the BOJ which recently removed its timeframe for targeting inflation, taken by the market as a bearish sign.

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USDCHF

JPY Positioning Turns Net Long Again USDCHF

Non-Commercials increased their net short positions in the Swiss Franc last week selling a further 4k contracts to take the total position to -37k contracts. CHF has come under heavy selling pressure over the last month as the risk off environment linked to the US – China trade war has largely dissipated due to the dialling back in rhetoric by the two sides but also from the SNB which made it clear that it is in no rush to move on rates and remains willing to intervene in the market as necessary.

AUDUSD

JPY Positioning Turns Net Long Again AUDUSD

Non-Commercials increased their net short positions in the Australian Dollar last week selling a further 6k contracts to take the total position to -23k contracts. AUD has been under heavy selling pressure also as the resurgent US Dollar has weighed on AUD which has also come under fire. This is because the market perceives an RBA rate hike as still being some way off. At its last meeting, the RBA noted that while the board now sees the next move in rate as up, the timing is in question as significant risks remain.

USDCAD

JPY Positioning Turns Net Long Again USDCAD

Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 200 contracts to take the total position to -24k contracts. CAD has fared a lot better in terms of positioning than the rest of the majors, remaining buoyant against the tide of a stronger US Dollar. One reason for this is stronger oil prices, which have been on a tear over recent weeks, causing investors to upgrade their CAD outlook despite the BOC taking a more cautious tone at recent meetings.

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