Year−end positioning shows a build−up in USD longs

Kasper Kirkegaard from Danske Bank A/S at 01/05/10

 

The most recent IMM report was compiled on 29 December, giving us an indication of year-end positioning. The unwinding of dollar shorts that accelerated in early December continued towards year-end and significant long dollar positions were added. As a result speculative investors turned net long in dollar for the first time since May 2009. Most notably, long dollar positions were added against the euro, taking net short EUR positions to 23 percent of open interest (compared with net long EUR positions of 30 percent of open interest just two months ago). Hence, EUR/USD risks from a position squeeze have shifted from the downside to the upside, leaving room for an accelerated move higher in the pair. Speculative shorts have also been built up in CHF and JPY, thereby increasing the downside risk in both USD/CHF and USD/JPY. On the contrary, net longs have been maintained in the commodity currencies AUD, NZD and CAD. The price action during the first days of 2010 even suggests that net long positions in these currencies have been built further.