CFTC Report: JPY Becoming Extremely Long – Rabobank

Net long USD positions have increased for the third consecutive week. Net long EUR positions have decreased. Net long GBP positions have decreased and net long JPY positions have increased for the fourth consecutive week, note Rabobank economists Jane Foley and Molly Schwartz.

Net long JPY positions are at their highest level since October

“Net long USD positions have risen for the third consecutive week, driven by a decline in short positions. Both ADP Employment and NFP came in lower than expected at 99K (cons. 145K) and 142K (cons. 165K) respectively, which was compounded by a downward revision of July NFP from 114K to 89K. However, just after US CPI inflation data seemed to set the stage for a 25bp September rate cut by the Fed, at the end of last week expectations for a 50bp move rose again following a WSJ article. Traders are now pricing in a 40% chance of a 50bp cut on September 18.”

“Net long EUR positions have declined, driven by a drop in long positions. Eurozone Q2 final GDP came in at a weaker-than-expected 0.2% q/q (cons. 0.3% q/q). The ECB announced its decision to cut the deposit facility rate by 25 bps from 3.75% to 3.50% last week. This decision was unanimously anticipated by economists polled by Bloomberg and widely anticipated by traders.”

“Net long GBP positions have declined, driven by a decline in long positions. GBP is the best performing G10 currency against the USD so far this year, returning 3.67%. The UK budget on October 30 is on the horizon. Net long JPY positions have risen for the fourth consecutive week, driven by a decline in short positions. Net long JPY positions are at their highest level since October 2016, and USD/JPY is trading at yearly lows at the time of writing. Although there is little to no expectation of a rate hike at the BoJ meeting on September 20, traders will be watching for any indication as to whether October could be an active meeting.”