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Forex Flash: Continued Short Covering in EUR, but JPY Shorts Added - Nomura

FXstreet.com (Barcelona) - Nomura strategists note that the notable positioning changes over the weekend included continued short covering by speculators in EUR, in addition to JPY shorts and paring back of AUD exposure.

They add that speculators covered $3.4bln of the $8.3bln EUR short, as the currency has generally stayed stable despite political concerns around Italy. They see that AUD selling likely reflects the significant commodities sell off over the weekend, to which Australia is geared, and the JPY moves likely reflect opportunistic dip-buying by CTA´s in USD/JPY.

They note that JPY positioning remains net short at -93k contracts and after some profit taking last week, they see that it appears speculators used the risk meltdown to buy more USD/JPY, adding $2.2bln of net short positions. They write, “The volatility market continues to reflect the same sentiment, but positioning is less extreme than in December indicating only a little cause for concern.” They see that there was continued short covering in EUR to the tune of 21k contracts, bringing the overall position to -30k, as shorts likely grew impatient with the lack of currency moves, amid slowing US economic data. Finally, the comment that the other theme was in commodity currencies, in line with the commodity meltdown on Friday and Monday. They write, “There was large scale selling of AUD ($2.6bn) as well as CAD ($0.4bn), and CAD risk reversals also point to extreme bearishness.”

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