IMM data released last Friday showed that investors in the week to 26 August added considerable net short positions in EUR and JPY. The move in EUR has sent non-commercial positioning in the single currency to the 5th percentile - the most bearish level since November 2012. In the same way the build in net JPY shorts has sent speculative JPY positioning to the 3rd percentile. In sum, positioning suggests a very high sensitivity of the two currencies to the upside. Therefore, should the ECB disappoint on Thursday, we see potential for a bounce in the EUR/USD. However, fundamentally we still expect the EUR/USD to edge lower, primarily driven by diverging monetary policy. In addition, the case for a short-term stronger USD has strengthened in recent weeks in light of the strong performance of USD-denominated assets.
The bearish builds in EUR and JPY were the primary drivers for this week's overall bullish USD build (see page 2), which sent total non-commercial USD positioning to the 99th percentile - the most bullish level since June 2013.
In the week to 26 August investors added net long positions in the high yielding currencies of AUD, NZD and MXN. The move in MXN was particularly significant as it was the largest single week bullish build since April this year. Nevertheless, from a historical perspective speculative positioning in the three currencies remains broadly square.
In commodities, speculators added net longs in copper lifting speculative copper positioning to an absolute long level at the 45th percentile. Investors also added net shorts in soybeans as well as reducing their net long positions in oil. However, from a historical perspective the changes in commodities positioning this week - including the changes above - were insignificant.
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