- CAD net longs increased the most since January 2013
- USD net positioning has slipped into the negative territory for the first time since the greenback began its rally
- NZDJPY could constitute an interesting opportunity ahead of the RBNZ
Along with a massive sell-off seen in the US dollar over the course of recent weeks, the commodity-related currencies seemed to gain the most which, in addition, were underpinned by an improvement of the outlook for global growth. Nowadays, the US dollar net positioning has already slipped into the negative territory for the first time since the greenback began its rally in mid-2014. Either way, one needs to keep in mind that the market positioning on its own could turn out to be insufficient to predict future prices, however it might come in handy in case of a broader analysis.
The Canadian dollar net positioning achieved the highest level since January 2013 suggesting massive overvaluation of the currency. Source: Bloomberg
At first let’s take a look at the Canadian dollar positioning which struck the highest point since January 2013 in the week ended August 1. The rally began in the aftermath of an interest rate hike (or even in a run-up to that event) which the BoC delivered last month. While the Canadian dollar has lost some of its gains lately, the positioning has not changed as of yet. Speculative investors added 14k fresh longs just in the last week.
The net long positioning on the New Zealand currency holds onto its record high even as it was left unchanged last week. Source: Bloomberg
Moving on, there is the NZD where the positioning remains at its record level even as it was not changed in the recent week. So lofty positioning could be especially worth looking at when we take into account the RBNZ meeting which is going to take place on Wednesday. The NZD has decisively strengthened since the last central bank’s meeting, hence there is guesswork that the statement could afflict the currency.
USD net positioning has slipped into the negative territory for the first time since mid-2014. Source: Bloomberg
While the net positioning on the CAD and NZD has already entered an elevated level, the net positioning on the greenback has declined below zero for the first time since the US dollar began its rally in mid-2014. Factoring in a better than expected jobs report for July and relative undervaluation of the US dollar against the bond market, one could assume that some rebounds could emerge when investors begin unwinding their positions.
The Japanese net positioning remains close to its record low levels. Source: Bloomberg
At the end, it’s worth mentioning the Japanese yen positioning which stays close its lows suggesting some upward pressure on the currency going forward. To sum up, the conducted positioning analysis suggests two possible trade ideas.
The NZDJPY could go lower in the nearest future as the price rebounded from a crucial resistance. Source: xStation5
Technically, the NZDJPY could be susceptible to a corrective move downwards as the price managed to rebound from a significant resistance placed at 84. Moreover, a weekly time frame saw a bearish engulfing pattern which could bode well for bears. The pair could slump to as much as 76, however an ascending trend line could be run into at first.
The USDCAD has bounced more than 250 pips after the pair marked its lows in the vicinity of 1.24. Source: xStation5
The second trade idea could take place on the USDCAD. The pair has managed to rebound quite significantly from the lows placed at around 1.24. Bulls could eye 1.2830 as the nearest more noticeable resistance. Given a pace of the CAD’s out-performance over its peer in the US seen during the last couple of weeks, there could be fairly substantial room to unwind some of longs as investors could switch from the CAD towards the oversold USD.