• The latest IMM data cover the week from 9 to 16 February.
  • EUR/USD managed to see somewhat of a consolidation last week as the Euroland debtproblem dominated fewer headlines and risky assets posted a decent rebound. Still, noncommercialinvestors added further to short EUR positions, which have now reached a 10-year high at 30 percent of open interest.
  • The IMM data were collected prior to the Fed hiking the discount rate however, suggestingthat short EUR positions might have been built even further. As we have argued repeatedlyin recent weeks, the crowded positioning does pose a significant upside risk to EUR/USD– December’s dollar rally showing just how powerful a position squeeze can be. That said,one should bear in mind that extreme positioning can be very long-lived.
  • Long JPY positions were cut back to 12 percent of open interest and we suspect that longJPY positions have been unwound even further, as recent price action has demonstratedhow much at risk long JPY positions are from any indication of an early Fed monetarypolicy unwinding. USD/JPY is currently the G10 currency pair trading with the highestcorrelation to relative interest rates.
  • Coinciding with an improved risk sentiment, long positions have been extended in bothCAD and NZD. In contrast, positioning remains unchanged in AUD, despite the Australiandollar actually outperforming the other commodity currencies.