The popular CFTC COT report is indicating record non-commercial EUR shorts but other metrics are not as clear, notes Deutsche Bank (XETRA:DBKGn).
"Although the latest net short EUR/USD futures position is indeed a record, dollar longs against all other currencies nearly halved since the beginning of the year. Net EUR shorts were larger as a percentage of open interest in 2012 but the futures market has been expanding over time, making all positions seem large relative to history," DB adds.
So who is selling Euros now? Hedge funds more aggressively short than asset managers
"We can see EUR positioning in greater detail by looking at the TFF (Traders in Financial Futures) breakdown. Although asset managers have been steadily building EUR/USD shorts since 2013 it was leveraged funds that drove the record short EUR IMM positioning since July as they collectively anticipated the price action," DB clarifies.
"Retail investors may be chasing the price action…but they have not been wrong yet," DB adds.
...and by how much?
"One last part of the story includes the remarkable rise in AUM for USD-hedged equity ETFs since the dollar surge began. The two largest USD-hedged international ETFs, Wisdom Tree’s HEDJ and Deutsche Bank’s DBEF, have accumulated over $26bn AUM, a year-on-year increase of nearly 15x," DB notes.
EUR/USD fall: Parallels with USD/JPY early rise.
"Our FX strategy team has emphasized the parallels between today’s euro sell-off and the earlier rise in USD/JPY sparked by Bank of Japan QQE. Both moves have seen speculative currency flows anticipate the large real money flows out of Europe and Japan, respectively, and into the rest of the world," DB argues.