Net long EUR positions increased, JPY shorts fell - Rabobank

According to the IMM net speculators’ positioning as at August 22, 2017, after trimming their bullish bets on the euro from the highest level so far this year set at the beginning of the month, market speculators increased their exposure to the single currency, notes the analysis team at Rabobank.

Key Quotes

“Net long EUR positions increased to 87.98k in the week ending August 22 up from 79.27k. While the biggest risk last week was that ECB President Mario Draghi may try to talk down the euro, he refrained from doing so when he spoke at Jackson Hole. With Fed Chair Janet Yellen also abstaining from providing fresh clues on monetary policy, EUR/USD resumed its bullish momentum rallying to yet another year-to-date high above the 1.20 level. Its status of safe haven – justified by stable political situation in the Eurozone (especially compared to political chaos in Washington) and an ongoing recovery in economic activity – also provided the euro with support.”

“The key question is how far EUR/USD could rally? Looking from the perspective of technical analysis, the upper boundary of the ascending multi-month channel currently at 1.21~ may cap further gains. That said, trying to pick up an important top tends to be a fruitless exercise. As long as EUR/USD continues to trade above the August 2 high at 1.1910, the upside bias will remain intact. A sharp pullback below this important technical pivot would imply that the short-term bias has shifted to the downside. In terms of potential factors that could trigger a correction in EUR/USD, a verbal intervention from ECB officials cannot be excluded given that a strong euro is disinflationary at the time when inflationary pressure is already subdued.”

“Net JPY shorts fell further for the fifth consecutive week to 119.25k on the back of prevailing geopolitical risk. While tensions recently eased, it proved short-lived after North Korea fired a ballistic missile that flew over Japan and landed in the Pacific Ocean.”

“GBP net short positions increased sharply throughout August to 45.9k on the back of rising market concerns about lack of progress in Brexit negotiations between the UK and the EU. Meanwhile, there is more evidence that the uncertainty caused by Brexit is taking its toll on the UK economy.”

“Market speculators are still bullish on CAD with long positions stabilising around 51k following the sharp fall from the year-to-date high of 62.82 set earlier this month. AUD longs edged modestly higher to 60.48k.”