EUR net long fell, modest shorts on USD - Rabobank

In IMM net speculators’ positioning as at April 3, 2018, speculators are modestly net short USD, according to the latest CFTC weekly report as an upbeat message about the US economy from various Fed officials, including Chairman Powell, allowed the Greenback to stabilise.

Key Quotes

“The DXY Index has been anchored to the 90 level since the end of February as the market has been evaluating the pace of tightening by the Fed and whether a full-scale trade war between the US and China may erupt. To improve the outlook for the DXY Index, a strong break above the 91 pivot is required. Above that, the 92.50~ is another important level to watch. A close above it would indicate that the USD bulls are gaining the initiative.”

“While net long EUR positions fell from the previous week, the bulls are still in charge. The bullish sentiment amongst speculators is also reflected in the latest Reuters FX survey as EUR/USD is expected to rise to 1.28 on a 12 mth view. In contrast to the consensus expectation, we revised lower our forecast for EUR/USD last month from 1.28 to 1.21.”

“Rising market optimism about Brexit negotiations led to a further increase in net long GBP positions to the highest level so far this year. Amongst the G10 currencies, only the Japanese yen and the Norwegian krone firmed against the US dollar more than sterling so far this year.”

“Over the past few weeks the yen has been benefiting from its status of safe haven. Foreign investors have trimmed their exposure to risky assets amid escalating concerns about a trade war between the US and China. For the first time this year speculators are net long the JPY as bearish bets on the JPY have plunged significantly in tandem with the sharp retracement in USD/JPY.”

“It would be reasonable to expect the Swiss franc to gain on the back of rising risk aversion, but speculators are still net short CHF amid concerns that the SNB could intervene to prevent its currency from appreciating excessively.”

“The Canadian dollar is an excellent example of the importance of monetary policy. Rapidly fading expectations that the BoC may raise interest rates further this year undermined sentiment towards the CAD, which caused a sharp fall in long positions to the lowest level ytd.”