IMM data released last Friday revealed the largest single week bearish JPY build since July. Non-commercial JPY positioning is now back to the 3rd percentile in a historical perspective illustrating the high sensitivity of JPY crosses to JPY strengthening. However, fundamentally we still expect a weaker JPY primarily driven by bond portfolio outflows and a reform of the conservative investment strategy of the Japanese Government Pension Investment Fund (see FX Forecast Update, 15 September).
The significant move in JPY positioning drove the residual USD positioning above the 99th percentile (see page 2) - the highest level since May 2013, the time where the word 'tapering' was used for the first time. Measured both in absolute terms and as a percentage of open interest, speculators added net EUR shorts in the week to 23 September. Fundamentally, we still expect EUR/USD to gradually edge lower but highlight that positioning still suggests a 'jagged' trend lower.
Friday's report also showed yet another week of significant long AUD slashing sending non-commercial positioning back to levels last seen in April. On the other hand, speculators interestingly added NZD longs in the week to 16 September. These positions, however, have most likely been reversed in light of the recent news of RBNZ intervention.
In commodities, speculators added net short positions in copper for the fourth consecutive week sending speculative copper positioning close to historically stretched levels. The move is interesting as it falls on the back of better-than-expected Chinese PMIs suggesting a deeper worry of a Chinese slowdown. In the week to 23 September, investors also slashed net longs in oil. Positioning in the black gold, however, remains in stretched long territory.
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