EURUSD

EUR longs reduced when Non-Commercials sold 5.2k contracts to take the total position to 140k contracts. After surging to fresh record highs over the prior week, investor’s scaled back some of their upside exposure ahead of the ECB’s January meeting due this week. The ECB is widely expected to keep policy unchanged at this month’s meeting, delivering a relatively unchanged statement, which reiterates the bank’s commitment to keeping monetary policy at an accommodative level. In this light, EUR has the potential for some short term weakening though, and pull backs are likely to find dip buyers as the market continues to expect that the ECB will withdraw monetary stimulus at a faster rate than is currently projected.

GBPUSD

Non-Commercials increased their net long positions in Sterling last week buying a further 1k contracts to take the total position to 26k contracts. Sterling upside positioning has grown steadily over the last few weeks as investors continue to look favourably on the British pound due to solid economic data and hawkish BOE expectations. Focus this week will be on labour market data and Q4 GDP due on Wednesday and Friday respectively. Data since the start of the Brexit negotiations has continued to print firmly, increasing investor expectations that the BOE will raise rates at a quicker pace than is currently scheduled. Given his view, this week’s data will be particularly important and the Q4 GDP print especially, is likely to provide a catalyst for direction in the near term.

USDJPY

Non-Commercials reduced their net short positions in the Japanese Yen last week buying 6k contracts to take the total position to -119k contracts. This is the first reduction of short positioning in over a month, reflecting the profit taking ahead of the BOJ’s upcoming, given the extent to which the short position has been growing over the last six months. At its meeting this week, the BOJ is widely expected to keep policy unchanged with the inflation outlook likely to be unchanged also, as the Nikkei newspaper reports that the bank is waiting for the shunto spring wage negotiation results.

USDCHF

Non-Commercials reduced their net short positions in the Swiss Franc last week buying 1k contracts to take the total position to -21k contracts. While not as extended as late last year, the CHF short position remains intact as firm risk appetite creates an absence of safe haven demand for the franc. The SNB continues to reiterate its message of willingness to intervene in the markets as necessary though the raising of its inflation outlook at its latest meeting has created speculation that the bank is considering a change in policy this year.

AUDUSD

Non-Commercials increased their net long positions in the Australian Dollar last week buying a further 5k contracts to take the total position to 10k contracts. A combination of a weaker US Dollar, resilient commodity prices, strong Q4 China GDP and strong labour market data for December has created a platform of demand for AUD once again. While the long position is currently less than a quarter of the size it was during Q3 last year, investor sentiment is becoming more positive and further upside is likely. Despite better data generally, wage growth remains weak in Australia and this creates a challenge for the RBA, which continues to highlight a message of caution regarding the normalisation of monetary policy.

USDCAD

Non-Commercials kept their long positions in the Canadian Dollar unchanged last week, with the total position sitting at 17.5k contracts. Upside positioning in the Canadian Dollar has lost momentum over recent months as the impact of BOC tightening has had a limited effect on price action. At its latest meeting the BOC raised rates by a further 0.25% and reiterated its data-dependant stance saying that some monetary accommodation is still required with the bank noting that they are still concerned about the impact of NAFTA negotiations and the US’s protectionist stance

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