EUR shorts increased, GBP shorts trimmed - Rabobank

According to the IMM net speculators’ positioning as at April 9, 2019, speculators increased their bearish bets on the euro further with short positions rising to the highest level since early December 2016 in early April, notes the research team at Rabobank.

Key Quotes

“While at this stage short EUR does look like a pain trade as EUR/USD has been trading relatively well so far in April, the bearish view on the single currency is still valid.”

“Essentially, the Eurozone continues to underperform the US economy by a mile and the interest rate differential is skewed firmly in favour of the dollar as reflected in an increase in USD net long positions to the highest level in four weeks. Looking further ahead, EUR/USD is likely to lean lower in the coming months with 1.10 as our 6-9 month target.”

“GBP net shorts have been trimmed further to the lowest level since June 2018.”

“With speculative positions almost neutral, market participants can keep their powder dry for next sharp move in GBP/USD. The pair is stuck between the upside trendline from the December low and the trendline resistance from the March high. In the coming days/week cable will approach an inflection point, i.e. it will break from this consolidation phase.”

“Fading market concerns about global slowdown led to a further rise in JPY net short positions. This coincided with a recent rebound in USD/JPY which has reached a crucial technical pivot: the resistance area formed by the Nov/Dec lows around 112.24 level and the March high at 112.14. This area must be cleared to improve the technical outlook for USD/JPY, which provides clues for other asset classes as well, including emerging markets.”