Overall:
With the CFTC data updated until 30 March the EUR showed the biggest decrease of (-19.5K) and the AUD showing the biggest increase of (+6K).
AUD, NZD & CAD:
Positioning still favours further upside for the three high beta FX majors. The strong push higher in global equities last week is another positive catalyst to keep in mind in the week ahead.
Even though we maintain an upside bias for the AUD, NZD and CAD, but given the BOC's recent action to discontinue some of their market functioning programs and the complete reversal of NZ10Y after it's recent push lower we would prefer the NZD and CAD above the AUD as we also
have the RBA this week which could influence the AUD.
The med-term bias for all three remains titled higher.
JPY & CHF & USD:
The big deviation in positioning we mentioned in last week's report saw some mean reversion in the JPY albeit it only minor moves. With risk appetite taking a more positive turn at the latter part of last week, and with the solid economic data points from the US, the risk on added additional pressure on the JPY, but positioning still has some possible room left to unwind which is a risk to our medterm downside bias.
The Dollar's price action at the latter part of last week was very important. Despite the best ISM Mfg PMI since 1984 and despite a solid NFP print which came in much higher than expectations, the Dollar failed to sustain any meaningful upside, and instead continued it's overdue mean reversion to the downside.
This might be the first signal that the positioning-related squeeze might be fizzling out and could potentially be the market turning it's attention back to the reflation narrative as we head into the highly anticipated Q2 of 2021.
GBP:
The bias for Sterling remains firmly titled to the upside, we maintain an upside bias in GBPUSD, especially with the Dollar's soft price
action following last week's solid data points.
The calendar will be very light for Sterling, so the overall focus will arguably fall predominantly on price action in the EUR and the USD.
EUR:
The reasons to expect downside for the EUR has been on the rise recently. Whether we consider the vaccine roll out, or recent virus numbers, or lockdown restrictions, or relative growth dynamics, or policy normalization expectations, all the above point to further downside for the EUR versus the USD and GBP, as well as the high betas.
Despite shedding a lot of net long positioning in the past two months, the EUR remains the largest net long position among the majors, which means there is quite a bit of room to run to the downside if the above concerns continue to pressure the single currency.
However, the one caveat to the EUR is it's sensitivity to the Dollar. With the Dollar pushing lower we've seen the EUR breathe a sigh of relief, and as long as the Dollar remains pressured we could see the EUR gaining some upside momentum.
This report reflects the COT data updated until 30 Mar 2021.
With the CFTC data updated until 30 March the EUR showed the biggest decrease of (-19.5K) and the AUD showing the biggest increase of (+6K).
AUD, NZD & CAD:
Positioning still favours further upside for the three high beta FX majors. The strong push higher in global equities last week is another positive catalyst to keep in mind in the week ahead.
Even though we maintain an upside bias for the AUD, NZD and CAD, but given the BOC's recent action to discontinue some of their market functioning programs and the complete reversal of NZ10Y after it's recent push lower we would prefer the NZD and CAD above the AUD as we also
have the RBA this week which could influence the AUD.
The med-term bias for all three remains titled higher.
JPY & CHF & USD:
The big deviation in positioning we mentioned in last week's report saw some mean reversion in the JPY albeit it only minor moves. With risk appetite taking a more positive turn at the latter part of last week, and with the solid economic data points from the US, the risk on added additional pressure on the JPY, but positioning still has some possible room left to unwind which is a risk to our medterm downside bias.
The Dollar's price action at the latter part of last week was very important. Despite the best ISM Mfg PMI since 1984 and despite a solid NFP print which came in much higher than expectations, the Dollar failed to sustain any meaningful upside, and instead continued it's overdue mean reversion to the downside.
This might be the first signal that the positioning-related squeeze might be fizzling out and could potentially be the market turning it's attention back to the reflation narrative as we head into the highly anticipated Q2 of 2021.
GBP:
The bias for Sterling remains firmly titled to the upside, we maintain an upside bias in GBPUSD, especially with the Dollar's soft price
action following last week's solid data points.
The calendar will be very light for Sterling, so the overall focus will arguably fall predominantly on price action in the EUR and the USD.
EUR:
The reasons to expect downside for the EUR has been on the rise recently. Whether we consider the vaccine roll out, or recent virus numbers, or lockdown restrictions, or relative growth dynamics, or policy normalization expectations, all the above point to further downside for the EUR versus the USD and GBP, as well as the high betas.
Despite shedding a lot of net long positioning in the past two months, the EUR remains the largest net long position among the majors, which means there is quite a bit of room to run to the downside if the above concerns continue to pressure the single currency.
However, the one caveat to the EUR is it's sensitivity to the Dollar. With the Dollar pushing lower we've seen the EUR breathe a sigh of relief, and as long as the Dollar remains pressured we could see the EUR gaining some upside momentum.
This report reflects the COT data updated until 30 Mar 2021.