The International Monetary Market (IMM) non-commercial
positioning is used to visualise the flows of funds from one currency to
another. It is usually viewed as a contrarian indicator when it reaches an extreme
in positioning.
Euro positions have moved into long territory just before
the FOMC meeting. Even though long Euro positions have likely been cut back, we
expect further short Euro re-positioning by investors in the light of
Bernanke's comments. Therefore, investors positions favour further downside
risks for the EUR/USD.
Along with the Euro, the Swiss franc has also crossed into
long territory, but in a sudden sharp move. This dramatic shift likely reflects
the weakening appetite for risky assets as the Fed is fast approaching a
reduction in its assets purchase programme. Although this risk aversion could
continue, we continue to believe that the 1.20 threshold in EUR/CHF will hold.
Therefore, the appreciation of the Swiss franc should be limited.
Investors continue to increase their short position in the
Australian dollar. It is now around the same extreme levels reached in 2008.
However, we continue to favour further AUD weakness, as Australia has to deal
with a structural growth transition from the mining sector to non-mining
sectors. But we acknowledge that extreme short positions could lead to violent
short-term rebounds in AUD/USD.
MIG Bank
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