EUR/USD

Non-Commercials increased their net long positions in the Euro last week buying a further 4k contracts to take the total position to 152k contracts. This latest growth in upside exposure brings EUR long positioning to fresh record highs as traders position themselves in anticipation of the ECB normalizing monetary policy. Accordingly, main focus this week will be on the ECB’s April rate decision and monetary policy meeting.

While the bank is not expected to adjust policy any further at this stage, the market will be keen to hear the bank’s latest economic assessment and outlook and while many are expecting the bank to strike a hawkish tone, endorsing the continued EUR buying spree, there are downside risks.

Recent eurozone data has shown signs of moderating alongside growing fears regarding a trade war, could fuel the ECB to strike a more cautious tone compared with the last meeting where the bank cited upside risks. If the bank does strike a more cautious tone we can expect some retracement in ECB, though ultimately the market is geared for a topside break and any dips are likely to be bought into.

GBP/USD

Non-Commercials increased their net long positions in Sterling last week buying a further 5k contracts to take the total position to 48k contracts. While GBP upside continues to grow some of these later established positions will likely have been taken out in the GBP retracement. Investor sentiment has been growing favourably for GBP over the last 6 weeks, though events last week fuelled a sell-off as Retail Sales and CPI came in lower than expected, following by a dovish speech by BOE’s Carney who cast doubt on the likelihood of a May rate rise as he highlighted recent data weakness and said that policymakers are conscious that there will be other chances to raise rates this year.

USD/JPY

Non-Commercials reduced their net short positions in the Japanese Yen last week selling 0.2k contracts to take the total position to 3k contracts. After flipping net long earlier this month for the first time since 2016, JPY positioning has lost some steam over recent weeks as the market recalibrates following the shift in sentiment.

Global risk sentiment continues to sit at the forefront of JPY flows. The lack of any surprises from the Trump-Abe summit last week has seen JPY declining as safe-haven demand fades. Key focus this week will be on the BOJ’s April meeting, due on Friday. The meeting is not expected to yield any surprises and should simply see a reaffirmed commitment to the bank’s Yield Curve Control program. Also, this week is the North-South Korea summit on Friday which, if positive, should fuel further declines.

USD/CHF

Non-Commercials reduced their net short positions in the Swiss Franc last week buying 0.2k contracts to take the total position to -10.5k contracts. Positioning adjustments in the Swiss Franc have dried up over recent weeks as the market awaits a fresh directional catalyst. The SNB has warned markets that it remains willing to intervene in the market as necessary to counter the excessive CHF strengthening that might occur in response to trade wars fuelled by protectionist US trade policy.

AUD/USD

Non-Commercials increased their net short positions in the Australian Dollar last week selling 8k contracts to take the total position to -10k contracts. The recent deterioration in global risk sentiment has weighed heavily on investor sentiment towards AUD, with the market dialing back its RBA rate hike expectations. At its last meeting, the RBA minutes show that policymakers now agree with the governor’s view that the next rate move will be up but again, not for a good while. Though this is a positive development, headwinds to the domestic economy mean that questions over timing are more relevant and as such, AUD is likely to stay pressured until financial risks in the economy subside.

USD/CAD

Non-Commercials reduced their net short positions in the Canadian Dollar last week buying 1.5k contracts to take the total position to -30k contracts. CAD has been net bought over the last two weeks now as investors square up some their downside exposure heading into the BOC’s April meeting. As expected, the BOC kept policy unchanged at its latest meeting though did reiterate that it sees gradual rate rises as appropriate, though the timing of these adjustments will be data dependent. Furthermore, the BOC did acknowledge recent data weakness over Q1 which led to a lowered Q1 GDP forecast.