USD longs reduced, CAD shorts cut - ANZ

Analysts at ANZ note that leveraged funds remained net USD sellers for the sixth consecutive week while funds reduced their net long USD positions by USD2bn to USD4.7bn, the lowest since June 2016, according to the positioning data for the week ending 27 June 2017.

Key Quotes

“Weak price action of the USD after the cut-off date suggests a further reduction in net USD longs with the main exception of USD/JPY.”

“Dollar selling was the highest against the CAD on the back of a hawkish Bank of Canada. Funds reduced their net CAD shorts by USD2.3bn to USD3.2bn. Price action since then pointed to further short covering of CAD, with USD/CAD breaking the 1.30 support. Net AUD and NZD longs also increased by USD0.6bn and USD0.3bn respectively. Positioning for these currencies is likely to have strengthened further as the USD continues to falter and selected commodity prices rebound.”

“Reversing previous week’s net selling, funds turned bullish on the EUR after ECB President Mario Draghi signalled a possible reduction in monetary stimulus going forward. Leveraged funds reduced their net short EUR positions by USD1bn to USD1.5bn. Since then, strong price action of the EUR suggests a further pare-back in short EUR positions.”

“On the contrary, funds turned bearish on the JPY and GBP after being net buyers in the previous week. Net short JPY and GBP positions were increased by USD1.6bn and USD0.4bn respectively to USD2.9bn and USD1.3bn. However, a hawkish turn in BoE Governor Carney’s comments on 28 June on the need to remove some monetary accommodation, will likely have led to some short covering in GBP.”

“Among EM currencies, MXN saw net buying of USD0.9bn, reversing net selling of USD1.3bn in the previous week. RUB’s net long positions were marginally reduced to USD0.6bn while long BRL positioning was largely unchanged at USD0.2bn.”

“Fund positioning on gold and crude oil diverged after 12 consecutive weeks of moving in synchronisation. While net crude oil longs were increased, net long gold contracts saw a further reduction. Meanwhile, net long 10-year UST positions were cut for the third successive week, in tandem with rising global yields after a number of central banks joined the US to look at a reduction in monetary accommodation.”