Short EUR positions remain in place

Danske Research Team from Danske Bank A/S at 01/25/10

 

The latest IMM data covers the week from 12 to 19 January. Short dollar positions were extended slightly in the week to 19 January, but remain fairly modest at USD4.3bn. The build-up in dollar shorts mainly reflects an unwinding of short GBP positions, which were reduced to 24% of open interest, from 40%, amid general strong sterling performance. Following the collection of IMM data, sterling has lost its positive momentum, however, suggesting that also the momentum at which GBP shorts have been unwound has slowed. While speculative investors overall added to short dollar positions, this does not reflect a change in sentiment towards EUR/USD – and indeed sovereign debt concerns remain a drag on the single currency. Short EUR positions were built further to reach 15% of open interest. While positioning cannot yet be characterised as crowded at these levels, risk on EUR/USD from a position squeeze is surely centred on the upside.
The commodity currencies NZD, AUD and CAD remain at risk from a position squeeze, as suggested by their significant net long positions.