The latest IMM data covers the week from 21 April to 28 April 2015.
IMM positioning data released on Friday showed that the aggregate speculative positioning in the USD saw another week of long covering . Speculators have now unwound their exposure to the 'greenback' in five consecutive weeks, sending positioning to the least bullish level since September 2014. Last week's change in positioning was the third-largest single-week long covering in 2015 and was driven primarily by another week of JPY short covering (see next paragraph) and notably the largest EUR short covering in 2015. Indeed, EUR/USD has bounced sharply in recent weeks and, while the change in positioning does reflect disappointing US data, the move is likely to be exaggerated by the past year's persistent downward trend in EUR/USD, which sent USD bullish positions to an historical high. The stretched positioning built up high USD sensitivity to the downside and, together with a general market correction (equities, bonds), investors are now trying to protect profit on their short EUR/USD exposure. However, we do think that the patience among investors will return as the talk of the first Fed hike returns - we still expect a take-off in September - which should send EUR/USD lower and, in our view, below parity in 6M.
Investors continued to shred their bearish JPY positions ahead of the 30 April Bank of Japan (BoJ) meeting, sending positioning above the 55th percentile in an historical perspective and very close to absolute neutral territory (see page 2). As widely expected, the BoJ did not announce additional easing measures and our base case is that BoJ will not expand its QE programme further as (1) inflation seems to be bottoming, (2) wage growth appears to have picked up, (3) we still expect a positive output gap and (4) there is no political pressure for more easing. Saying this, remember that the current pace of asset purchases is very aggressive and, with a less-bearish yen positioning, this has increased the upside potential in USD/JPY when US data recovers and a Fed hike comes closer. We target USD/JPY at 121 in 1M and 125 in 3M (NYSE:MMM).
The IMM data also shows speculators added to their bearish GBP positions . This is in line with our fundamental view, as we expect the final run-up to the UK general election to be a source of GBP weakness given the outlook for a complicated political landscape.
In commodities, investors reduced their bullish oil positions to an historically neutral level.
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