Yellen: The Aftermath, CFTC Positions

The market spent all last week waiting and anticipating Yellen's Jackson Hole speech and were left saying “that's it?” afterwards. The quiet speech won't change the underlying trend in the US dollar, which is 10-20 pips higher across the board to start the week, but the domestic drivers in each currency will begin to create some differentiation. Last week's CFTC positioning data showed cable longs hanging tough.  In our existing Premium Insights, 1 of our 2 EURAUD shorts hit its final target with 380 pips profit,  while our long AUDNZD long is currently netting 60 pips. The current USDCHF long is now netting 150 pips. GBPUSD and USDJPY were both stopped out. All details are in the Premium Insights.

The most significant part of Yellen's speech was that the word “significant” remained to highlight the slack in the labor market. Its days are numbered but it might have a longer life than some anticipated and that could keep the Fed on the sidelines for longer.

As dovish as Yellen remained, her counterparts were moreso. Kuroda said Japan is only “halfway” to achieving price stability. If USD/JPY has risen 25 big figure since he embarked on his quest, does that mean it can move 25 more? If US economic data continues to improve, 130.00 isn't out of the question.

In early trading the New Zealand dollar is the laggard. One reason is so fresh political intrigue ahead of the Sept 20 election. The results were seen as a foregone conclusion but on the weekend Kim Dotcom formed an alliance with the Mana Party and it could form a bloc that would give the opposition Labour Party the balance of power.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

EUR -139K vs -126K prior

JPY -87K vs -81K prior

GBP +13K vs +19K prior

AUD +37K vs +30K prior 

CAD +7K vs +18K prior

CHF -15K vs +17Kprior

NZD +12K vs +12K prior

Every week when we see euro shorts growing it's a reminder of how one-sided positioning has grown in the pair. And that's a good thing because it keeps us on guard against the inevitable correction. On Friday, Draghi opened the door for more unconventional measures but brushed aside the latest soft inflation measures by saying they were temporary.

The other thing that stands out is that cable positioning remains net long despite 8 weeks of selling. Along with the Fed the BOE will be one of the first central banks to hike so perhaps a longer period of consolidation rather than a further decline is the most likely path forward. Or maybe there are more longs that still need to be squeezed.