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CFTC Commitments of Traders: EUR shorts increased.

  
Analysis, Forex

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  • EUR long 111K vs 104K long last week. Longs increased by 7K
  • GBP short 14K vs 16K short last week. Shorts trimmed by 2K
  • JPY long 18K vs 17K long last week. Longs increased by 1K
  • CHF long 7K vs 4K long last week. Longs increased by 3K
  • AUD long 4k vs 1K short last week. Position switches from short to long.
  • NZD short 1K vs 0K short last week. Longs increased by 1K
  • CAD short 20k vs 17K short last week. Shorts increased by 3K

Highlights:

  • EUR longs remain the largest position by far.  The EUR has reached the highest level since March this week
  • AUD position switch from being marginally short to marginally long
  • NZD position remains near unchanged
  • CAD shorts remain the 2nd largest speculative position.

ECB meet this week (preview) but they are already driving the higher euro

  
Analysis, Forex
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As was noted during the US time zone, EUR/USD pierced 1.14. A factor that appears to have flown under the radar is this sign of (continued) aggressive policy support from the ECB, that is:
  • ECB corporate bond-buying was up 3.3bn EUR last week, which is around 400m higher than the previous record high over the past 4 years operation of the Bank’s corporate bond purchasing program
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ps, ICYMI, the EU Recovery Fund will be the discussion point of note for markets in the ECB meeting Thursday
  • financing totalling up to EUR750 bn, split between grants of EUR500 billion and loans of EUR250 billion
  • Netherlands, Austria Denmark and Sweden want to reduce the amount of funds distributed as grants

Risk ahead for the EURO this week

  
Analysis, Forex
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ECB policy review and European summit

German bunds were trading at -0.46% yesterday on the 10 year chart which is 10bps lower than a Bloomberg modelled curve mentioned on the Bloomberg Live Blog yesterday. This is most likely due to positioning ahead of the European Council’s summit.

On Friday and Saturday of this week EU policy makers will meet to discuss the proposed €750 billion recovery plan.The big questions is whether nations like Austria, Denmark, Sweden, Netherland and Finland will block the plan. The  issue is that these countries are opposed to the idea of large handouts on principle.However, despite their reluctance, the present crisis means their reticence may be seen as mean spirited in a time of shared humanitarian crisis. The pressure is for the countries concerned about the ideas of grants rather than loans to approve this proposed fund.On July 10 we had a German official state that Netherlands is unlikely to block the EU recovery fund which is supportive of the fund being accepted.

On Thursday we have the ECB rate meeting with little change expected. With the PEPP program increasing by €600 billion euros last month  it is unlikely that we see any changes to the PEPP program on Thursday.

The risk

If the recovery fund is rejected by the frugal four expect immediate downside for the EUR. However, given that the second day of the meeting is taking place over the weekend this is going to be weekend risk for the EUR.

ECB policy review and European summit

AUD/USD to drop back to 0.64 by year end – global economy weakening, China retaliation

  
Analysis, Forex
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A brief summary from a late week Rabobank note on the Australian dollar:

  • investors are currently over-estimating the ability of the global economy to bounce back from the pandemic
Combined with:
  • any news that China could be targeting Australian exports in retaliation for the government’s political stance would also leave AUD vulnerable
Rabo’s view is thus:
  • we see risk of a drop in sentiment by the end of the year 
  • likely to drag AUD/USD lower
  • forecast AUD/USD at 0.64 on a six-month view
A brief summary from a late week Rabobank note on the Australian dollar:

Here’s a EUR/USD forecast (to 1.15) with the ECB expected to be optimistic this week

  
Analysis, Forex
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The European Central Bank meet this week, preview below.

  • Meeting Thursday 16 July 2020
  • Policy announcement at 1145GMT (policy likely unchanged)
Euro forecast via Danske (this from late last week):
  • We remain constructive and expect the broad USD to decline over the coming months
  • 3 month forecast is 1.15
On the upcoming ECB policy meeting
  • we expect a repetition of recent comments from various governing council members, thereby striking a cautiously optimistic tone compared to the June projections. 
  • We also expect they may decide not to use the EUR1,350bn PEPP envelope in full. 
  • No new initiatives are expected next week
  • Markets may not be prepared for a ‘less dovish’ message
  • with abundant liquidity, PEPP and APP still ongoing
  • Our key expectation is that the ECB will reiterate its stance towards supporting a recovery, with, not least, a focus on sovereign spreads. 
For spot FX,
  • the direction and stance of the ECB and euro area fiscal politics are, in our view, quite well priced and communicated (though to a lesser extent when it comes to the outcome for Brexit). In turn, it will be the breath and speed of the global recovery that sets the tone in EUR/USD, and mostly through the USD leg

European Central Bank preview

An Update :US Dollar ,Sterling ,Euro ,Yen ,CAD ,AUD ,Chinese Yuan ,GOLD ,Crude -Anirudh Sethi

  
Analysis, Crude, Forex
The bearish technical case for the dollar appears to be growing.  It is a little disconcerting that it seems to have become the consensus view, and the gross and net long speculative euro positioning in the futures market is near two-year highs.  However, the speculative positioning in the other currency futures is not nearly as extreme.  Indeed, speculators are still net short sterling, Australian dollar, and Canadian dollar.
Turns in the market often appear to have a cascading effect.  The turn does not happen all at once.  Given that the euro is the single most important currency in the world after the dollar, that is the real interest.  The Swiss Franc can sometimes be seen as its lead indicators. The Golden Cross (50 and 200-day moving averages) crossed down for last July.  The euro’s averages crossed late last month, and at the start of last week, the 50-day moving average moved below the 200-day moving for the Dollar Index.  The moving average for the Swedish krona crossed in the middle of June, while the  Aussie’s averages crossed on the last session in June.
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