Market Talk: FXWW

From the FXWW Chatroom: BAML: The latest CFTC positioning data shows that investors sold $1.9B of USD contracts and increased short USD positioning to $9.7B.  USDCAD positioning flipped short in our last report (9 straight weeks of selling) and we now see a race to join the short party.  Investors sold $1.5B USDCAD last week at the 3rd fastest pace in the past year and USDCAD shorts are near 3 year maximums. EURUSD (5 straight weeks of buying), AUDUSD (6 straight week of buying), NZDUSD longs and USDMXN shorts continue to look stretched.

Paul Ciana highlights key levels to watch in USD pairs – BBDXY is at critical support that held last week. Closes > 1150 keep hope for a USD oversold bounce. AUDUSD can’t seem to close up through its 200wk SMA and so price may fail at this resistance (.8012). EURUSD rally closed at a new closing high on Friday, though still below the 200wk SMA at 1.1798

HSBC;  This week is a very busy week,  and I think it warrants reassessing the broad Dollar complex we’ve assumed for the past few weeks.  In my estimation, Sterling remains the best Dollar long this week.  Cabinet infighting persisted over the weekend, and I expect the BOE to pivot away from rate hikes amid softness in recent data.  Ignoring the fact that Sterling is trading near cycle highs – the overall price action has been very sluggish over the past week.  In terms of today,  I remain short Cable here at 1.3125 with a stop above 1.3175.  In EURGBP, I like being long against .8900 – targeting an eventual break of .9000 later this week.  Flows remain light, but I expect downside momentum to pick up through 1.3070.  To the topside resistance sits at 1.3170.
CIZI: Short GBPNZD is the trade of the week for CitiFX Strategy.
–    GBP may be vulnerable approaching the MPC meeting. There are 10bp of hikes priced to year-end 2017. Citi Economics expect just two dissents and more confidence among the core members that the slowdown they anticipated justifies keeping rates on hold in the face of stronger inflation prints. This could see year-end priced move down to 5bp, taking GBP FX lower.
–    NZD sensitivity to even weak positive catalysts may be heightened given market positioning. According to our flow analysis, there has been intense selling of NZD in recent weeks, partly in response to the weaker-than-anticipated consumer price release. This may leave some investors poorly positioned for more positive news flow.
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