These numbers suggest that the dollar will rally
US Dollar Index:
Dollar sentiment strengthened in the week ending
September 20th as traders shifted out of non-dollar denominations. Slight shifts
in previously long euro and British pound positioning resulted in net short
initiatives while notably bigger changes can be seen in Swiss franc and Japanese
yen holdings. As a result, overall dollar implied strength rose from a previous
short 38,994 contracts to a positive 6,685. Subsequently, commodity bloc
currencies held most of their ground with little changes for the week. With that
said, and open interest residing at 12,289, the U.S. dollar index has broken
through technical resistance at 88.50 and remains suggestive of further upside
potential.
EUR:
Short selling continued in the single currency in
light of bullish traders standing their ground. Declining incrementally, long
positions dipped to 29,052 contracts, down from the previous 29,321.
Comparatively, shorts increased to 30,480 contracts, rising almost 40 percent in
the week. As a result, the euro zone currency now maintains a net non-commercial
short bias of 1,428 contracts with the open interest declining 44,077 contracts
to 118,666. Subsequently, the short to long ratio has now been built to 1.05
shorts per one long and looks to be accurately reflected in the underlying spot.
Notably, further shorting pressure may be applied as the technical support at
1.2000 quickly approaches.
GBP:
Similar to the euro counterpart, buyers lost
incrementally on the week as short sellers increased their holdings going into
the tailend of September. More noticeable, short interest rose 57 percent to
13,994 contracts from an 8,935 from the previous week as long positions dipped
incrementally to 24,572 from the previous 27,410 contracts. Subsequently,
bullish sentiment remains suppressed with the prior net non-commercial long
positioning of 18,475 having been reduced to 10,578 or 42 percent. Maintaining a
bearish tone, the underlying spot looks to be reflective of the notion declining
for the month of September with the long to short ratio declining by almost half
to a current 1.75:1 figure. Further downside in the underlying looks to be a
possibility in the near term with a break of the current 1.7700 support.
CHF:
Bearish sentiment vaulted higher in the week for
the Swiss franc, as with most of the major currencies. Long positions dipped by
40 percent to 2,488 contracts from 4,175 in the previous week. Additionally
surprising, shorts rose 75 percent on the week to 33,398 contracts, pushing the
short to long ratio to 13.42 shorts for every one long initiative. As a result,
the major remains net short with non-commercials at 30,910 contracts and
suggestive of a temporary retracement as the market has become one sided. The
underlying spot looks to be accommodating to the notion as we approach
formidable resistance at the 1.3000 figure. Subsequently, open interest resides
at 57,198 contracts down 3,647.
JPY:
As with the currencies across the board, yen
sellers additionally entered the foray pushing overall sentiment lower on the
week. Although long positioning rose incrementally by 1,674 contracts, short
side sellers pushed 14,369 contracts higher to 56,583. As a result, net
non-commercial positioning remains short at 47,629 with a subsequent rise in the
short to long ratio to just below a 5:1 figure. Similar to other majors, the
underlying spot seems to be reflective as the overall spot has risen over 300
pips since the 12th. However, notably, upside potential may be capped as we
approach the upside ceiling at 113. Additionally, open interest declined 61,397
contracts to 127,850 for the week.
CAD:
With crude oil rising on several factors during
the week, Canadian dollar interest remained strong, although top heavy
currently. Dipping slightly by 421 contracts to 45,536, buying interest remains
healthy in light of short interest rising 16 percent to 19,033 for the week. As
a result, net non-commercial positions have retained a bullish overtone,
although slightly dipping by 3,089 contracts and posting 2.39:1 long to short
ratio. Currently, this remains pivotal in the underlying as it hovers and
consolidates above the 1.1700 figure, suggestive of potential retracement. Open
interest remains healthy at 148,171 contracts, up 6,952 for the week.
AUD:
Sustaining bullish momentum, similar to the
Canadian dollar, Australian long positioning remained formidable at 36,201
contracts. Just 84 contracts shy of the previous week, buying pressure overcame
nonexistent selling pressure as traders pared back short positioning, creating a
healthy non-commercial net long bias of 36,201 contracts. Subsequently, this
poses a far greater risk of retracement in the underlying sentiment as the
previous long to short ratio of 11.92:1 has now been shattered. Comparatively to
the IMM positioning, underlying spot has been sold off for the past three
sessions. With sentiment riding the opposite direction, one can surmise a
potential bounce off of lower channel support. Open interest posts at 78,632,
down 17,735 contracts.
Richard Lee
Richard Lee is a Currency Analyst at Forex
Capital Markets. Employing both fundamental models and technical analysis
applications, Richard contributes regularly to DailyFX, Yahoo Finance and Comtex.
Prior to joining the research team, Richard was one of the senior instructors
for the FX Power Course, teaching thousands of traders the basics of currency
trading, technical analysis and how to implement trading strategies. He has
extensive experience in trading the spot currency markets, options and futures.
Richard previously traded FX, equity and equity derivatives for four years as
well as work for a private equity consortium before joining FXCM.