Intraday Market Thoughts

Big USD Week, EUR Net Shorts Soar

by Patrik Urban
Jul 27, 2014 23:35

The US dollar is poised for liftoff but it needs something, anything, from the Fed to light the ignition in the week ahead. Last week sported the unusual pattern of the Australian dollar as the top performer with the kiwi lagging – boosting one of our Premium trades. The latest CFTC data showed a surge in euro shorts. 

Last week ended with a durable goods orders report that was much weaker than the 0.7% headline suggested. Excluding defense and aircraft, both orders and shipments were weak due to sharp downward revisions. That led to some re-issued Q2 GDP forecasts and added downside risks to the 3.0% consensus in the first look at Q2 on Wednesday.

The main events in the week ahead are the FOMC decision and Friday's jobs report. The market has been burned a multitude of times for betting on a slight hawkish shift from Yellen that never seems to come. With the employment market continuing to improve it's growing difficult to justify rates so low.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -89K vs -63K prior JPY -54K vs -63K prior GBP +27K vs +39K prior AUD +39K vs +40K prior CAD +21K vs +16K prior CHF -7K vs -6K prior NZD +15K vs +15K prior

It doesn't take much to get the euro bears excited. They piled into shorts after the break of 1.3500, driving the euro net short to the most extreme since Nov 2012. The other notable move was the quick shift out of the pound. Traders were slow to warm up and now appear quick to exit with Carney sending mixed signals.  

On Thursday, we issued new trades in EURUSD and GBPUSD with four new charts, while sticking with our EURJPY and EURAUD shorts, especially as the latter entered at 1.46200, targeting 1.4200 missed its final target by 12 pips. We also await the final 1.1020 target in AUDNZD after the 1.0830 entry on Tuesday produced 1.1016 on Thursday, instead of the final 1.1020.

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