Positioning is no limit to USD/JPY upside
The latest IMM data covers the week from 30 November to 7 December.
Speculative investors remain net short of the dollar: Higher US bond yields have immunised the downward pressure on the dollar from the recent rally in risky assets. However, even after the 10-year treasury yield spiked above 3.10% on December 7 (when the IMM data was collected) seeing a rebound in the dollar index, non-commercial investors were still not willing to add US-dollar longs. Net positioning thus remains broadly unchanged with speculative investors marginally short of the greenback.
Short dollar positions are rotated from the euro to the commodity currencies: The biggest repositioning in the week to December 7 was seen from the euro to the commodity currencies. As EUR/USD rebounded to 1.34 non-commercial investors added to short euro positions, leaving net shorts at 8% of open interest. At the same time, net longs were added in both CAD and AUD, where long positions in terms open interest are still well below the crowded levels seen a couple of months ago. With the exception of NZD, positioning does not yet appear a major risk for the commodity currencies, which continue to see strong support from rising commodity prices.
Positioning does not appear a limit to USD/JPY upside: Higher US yields have especially supported the dollar against the yen, with USD/JPY rising back above 84. Still, non-commercial investors have not unwound the long yen positions that have been built since June. Hence, positioning should not be a limit to further USD/JPY upside should US bond yields correct even higher.
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