IMM positioning: Short dollar positions have been built further

Short dollar positions have been built further in the wake of further improvement in market risk appetite and performing risky assets. Despite the failure of EUR/USD to break meaningfully above 1.50 long EUR positions have been extended – albeit remaining well below the crowded levels seen in early October.

Speculative investors scaled back long positions marginally in the commodity currencies NZD, CAD and AUD, despite sustained strong performance since the late October correction in risky assets. This speaks in favour of the reduction in long positions being caused by profit-taking as the risk-reward has become less attractive. Positioning in all three currencies remain somewhat crowded though – and hence downside risks from a position squeeze significant.