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Speculative investors positioned for USD/JPY downside

Kim C. Larsson from Danske Bank A/S at 11/23/09


The latest IMM data covers the week from 10 to 17 November.

IMM position data was collected following very strong performance in risky assets and prior to the correction seen at the end of last week. It is therefore no surprise that short dollar positions have been building further. However, while the dollar has remained under pressure, EUR/USD has found it difficult to break meaningfully above 1.5. This could explain why short dollar positions have not been added against the euro, but rather that long EUR positions have actually been scaled back.

Instead, short dollar positions have been added against JPY, such that net long JPY positions now stand at 28% of open interest. Hence, positioning for USD/JPY downside has become more crowded, although still below the levels of September or February. 

Long AUD and NZD positions also remain fairly crowded, though the sell-off in the commodity currencies late last week – after the IMM data was collected – is likely to have resulted in longs being scaled back or stopped out. Indeed, last week’s price action illustrates the value in IMM data as NZD was both the currency with most crowded long positions and the pro-cyclical currency that saw the biggest sell-off during the correction in risky assets. This was a key argument behind our idea to enter a short NZD/CAD position last week.

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