After several weeks of relatively stable non-commercial EUR positioning, IMM data released on Friday revealed the largest single week bearish build in the single currency since July 2013. The move was sparked by the ECB meeting on 8 May where Draghi promised more easing in June. The promise of more EUR weakening has sent speculative EUR positioning in absolute short territory (31st percentile), albeit still close to broadly square (see page 3). Despite the change in sentiment, positioning still does not pose a barrier for further EUR/USD downside. This is reflected in our updated FX forecasts and we now expect the cross to trade at 1.36 and 1.35 in 1M and 3M, respectively (see FX Forecast Update: 'Draghi's promise' to weaken the euro , 15 May 2014).
Noteworthy, the week to 13 May also saw an unwinding of the CHF and GBP net longs for the third and fourth consecutive week, respectively. Speculative positioning in both currencies has now dropped to levels just below the 70th percentile and consequently no longer looks stretched long.
Friday's report showed a considerable build in net AUD longs, sending speculative AUD positioning to the 38th percentile. Investors have not been this long AUD since April 2013, suggesting that increasingly more positive news out of China is needed to send AUD higher.
In commodities, speculators added net longs in copper, lifting speculative copper positioning to the 32nd percentile in a historical perspective. The move reflects better-than-expected commodity trade figures out of China on 8 May although noteworthy investors are still absolute short copper. In the week to 13 May, investors also slashed net longs in Soybeans for the second consecutive week (now 65th percentile) and added net longs in Brent Crude (now 78th percentile), more than offsetting last week's unwinding of net longs in the black gold.
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