Sponsor Forex Brokers Aggregate Net Short Positions In USD Plunged Despite Price Weakness

Aggregate USD net shorts plummeted more than $5B to -$17.1B in the 6-week period ended November 3. Bringing down the dollar's new shorts were sharp declines in net speculative new long positions in Japanese yen, euro and Canadian dollar. However, -40% drop in GBP new shorts partly offset the result.

Although nets longs in Japanese yen picked up modestly following a sharp fall to 17530 in the previous week. It was still less than half of 45615, the highest in 8 months, recorded on September 22. Also, while yen's net long positions stayed in positive territory, current levels are far below the peak of 65920 in March 2008.

Since our last IMM report on September 28, Japanese yen only climbed +1.3%. However, price movement was volatile. It first rallied to as high as 88 against the dollar in early October as the Fed pledged to keep its policy rate at unprecedentedly low level. However, gains were pared as Japanese yen plunged to 92 2 weeks ago.

Net speculative long positions have been on a downtrend after making a 2009-high at 51045 in early October. The change was in tandem with price movement in EURUSD which pulled back to 1.46 after rallying to 1.5 last month. It's possible for traders to build up long positions in the currency pair again as EURUSD is prone to rise further.

In 6-week basis, net longs for CAD were cut one-third. In fact, net longs for CAD have been moving in a volatile manner. Although long positions stayed a relative high levels (above 30K) in August and most of September, they slumped to 18209 on the week ended September 29. Then, net longs surged again to as high as 44196 in mid-October. However, the positions slipped to 23369 last week.

For GBP, net speculative short positions reached a record high level at 65346 in the week ended October 13. This was inline with movement of GBPUSD which plummeted to 5-month low at 1.57/58 as the market speculated the BOE would extend the asset buying program by at least 50B pound. However, price then rebounded strongly as the less-than-expected expansion of the asset buying program signaled the last round of QE. Net shorts dropped for the 3rd consecutive week last week and dropped -40% on the 6-week basis.