IMM positioning data released on Friday revealed the fifth consecutive week of bearish non-commercial EUR builds. The EUR sell-off probably reflected increasing QE expectations ahead of the ECB meeting on 22 January. All in all, the IMM report still suggests that speculative accounts remain extremely long USD and short EUR, which keeps the cross very sensitive to correction risks. In particular, the cross could be subject to some profit-taking following the recent rapid decline in EUR/USD. However, from a fundamental point of view we still look for a further decline in EUR/USD targeting the cross at 1.10 in 6M.
Speculative investors also added short CAD positions last week prior to the interest rate meeting at the Bank of Canada (BoC) on 21 January, sending non-commercial positions to the most bearish level since April 2014 at the 12th percentile in a historical perspective. Despite the build-up in short CAD positions, the BoC's 25bp rate cut to 0.75% on 21 January was, however, a big surprise to the market. Hence, further short CAD positions have probably been established following the rate announcement.
Friday's report also showed a substantial reduction in non-commercial short CHF positions from 39.9% to 20.8% of open interest following the SNB's decision to abandon its 1.20 minimum exchange rate against the euro. As a percentage of open interest, the reduction in short CHF positions forms this week's largest change in positioning. In absolute terms, speculative accounts remain short CHF, according to the report.
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