Rising geopolitical tensions favour USD - Rabobank
Analysts at Rabobank lists down the IMM net speculators’ positioning as at 4 April, 2017.
Key Quotes
“After falling sharply to just 7.9k at the end of March, net EUR shorts increased to 11.4k as of April 4, mainly due to long positions being trimmed faster than shorts. Given that geopolitical tensions escalated last week, it is reasonable to expect a shift in favour of the US dollar, at least in the short-term. Last week EUR/USD extended its pullback from the March high at 1.0906 to 1.0581 low as the USD benefited from demand for US Treasuries. The euro is also driven by developments in French politics. The latest opinion polls imply that the first round of the presidential election is now a four way race as support for Melenchon, who represents the Left Front, increased as a result of his impressive performance in the last TV debate. That said, Macron is still likely to win the second round of voting.”
“While net USD shorts fell to 42.96k at the beginning of April, it is likely to be at least partially reversed as the Greenback has appreciated against its G10 peers since the US launched air strikes on Syria. The DXY Index rose to the highest level since the middle of March last week as investors shifted their capital to safe assets such as US Treasuries.”
“A gradual reduction of net short positions to 45.8k from 53.18k has failed to provide USD/JPY with a fresh momentum so far. The sideways trend between 110 and 112 prevails.”
“The market is still short GBP/USD due to prevailing uncertainty caused by Brexit, but the 50-day moving average at 1.2419 is proving a strong magnet so far this year. The upside contained by the year-to-date high set at 1.2706 at the beginning of February and the March low at 1.2110 is an important level to watch on the downside.”
“A strong rebound in oil prices from the year-to-date low caused a sharp rise in net short USD/CAD positions to 30.2k – the highest so far this year. That said, the 1.33 level is proving a tough level to clear on the downside in USD/CAD. Net bullish bets on the AUD have been trimmed 49.59k in the week ending April 4 as AUD/USD has been front heavy falling below the March low at 0.7491.”