From the FXWW Chatroom: EUR-phoria
•Positioning is flagging some risks to the EUR on a dovish tone from the ECB
•Much of the adjustment in EUR has been a covering of shorts rather than addition to longs from leveraged players
•LatAm was broadly out of favor last week; MXN in particular was sold after a long period of short covering
EUR vulnerable to a dovish Draghi
Ahead of the ECB, EUR positioning sounds a note of caution. While the level of positioning on a longer-term lookback does not look excessive, we note that in relative terms positioning in EUR has not been at longer levels over the past 5 years (Chart 1). Futures data also shows leveraged fund positions crossing into positive territory for the first time since 2014 (Chart 2), although, unlike asset manager positioning this is driven by a decrease in shorts, rather than addition to longs (Chart 2, Chart 3). The Eurozone has also been receiving the strongest equity inflows in G10 recently, as shown by EPFR data.
We believe the ECB will remove some of the asymmetric elements of forward guidance, but risks are tilted towards a dovish tone, with consequent risks to EUR given positioning.
•Positioning is flagging some risks to the EUR on a dovish tone from the ECB
•Much of the adjustment in EUR has been a covering of shorts rather than addition to longs from leveraged players
•LatAm was broadly out of favor last week; MXN in particular was sold after a long period of short covering
EUR vulnerable to a dovish Draghi
Ahead of the ECB, EUR positioning sounds a note of caution. While the level of positioning on a longer-term lookback does not look excessive, we note that in relative terms positioning in EUR has not been at longer levels over the past 5 years (Chart 1). Futures data also shows leveraged fund positions crossing into positive territory for the first time since 2014 (Chart 2), although, unlike asset manager positioning this is driven by a decrease in shorts, rather than addition to longs (Chart 2, Chart 3). The Eurozone has also been receiving the strongest equity inflows in G10 recently, as shown by EPFR data.
We believe the ECB will remove some of the asymmetric elements of forward guidance, but risks are tilted towards a dovish tone, with consequent risks to EUR given positioning.
Nomura: USDJPY
Our Tokyo desk running short here as it trades v poorly .. 109.42 is the gap bottom from the R1 French elections so a move below there they feel could q easily see another leg lower into the mid 108s .. after which the YTD lows of 108.13-39 will provide some good support
We have been net sellers of USDJPY o/n and with the market likely still long cross yens, should risk take a further turn, the d/side does still look vulnerable for now.
Our Tokyo desk running short here as it trades v poorly .. 109.42 is the gap bottom from the R1 French elections so a move below there they feel could q easily see another leg lower into the mid 108s .. after which the YTD lows of 108.13-39 will provide some good support
We have been net sellers of USDJPY o/n and with the market likely still long cross yens, should risk take a further turn, the d/side does still look vulnerable for now.
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