Long dollar positions remained in place going into 2010

Kasper Kirkegaard from Danske Bank A/S at 01/11/10

 

The latest IMM data covers the week from 29 December to 5 January. First positioning data of the new year shows that non-commercial investors have reduced long dollar positions slightly – though remaining marginal net long overall. A clear divergence can be seen among the G10 currencies, however. Net long dollar positions remain in place against the EUR, JPY, CHF and JPY – which were even built marginally further – while net short dollar positions are kept against the commodity currencies NZD, AUD and CAD. The IMM data was collected prior to Friday’s disappointing non-farm payrolls, which is likely to have implied a reduction in USD longs. Not least the move higher in EUR/USD, taking the pair above 1.45 again, is likely to have left short EUR positions vulnerable. The fact that net short EUR positions have been built against the dollar implies that risks on EUR/USD from a position squeeze remain on the upside. We see high probability that this will materialise, targeting 1.48 short term. NZD also looks at risk from position squeeze, implying that the expected risk/return from NZD longs has become less attractive.