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- Jul, 21 FX Options Sentiment Shows Early Signs of US Dollar Reversal
- Jul, 14 Forex Options Sentiment Points to Further US Dollar Declines
- Jul, 06 US Dollar Forecast to Fall Further versus Euro, British Pound
- Jun, 30 Forex Options Markets Warn of Euro, US Dollar Volatility
- Jun, 23 Bearish US Dollar Forecast Moderates on FX Options Shift
- Jun, 14 US Dollar Forecast to Pull Back Further versus Euro, British Pound
- May, 20 Forex Options Point to Australian Dollar Losses, Euro Gains
- May, 12 US Dollar Forecast Difficult as Volatility Surges
- May, 07 US Dollar Forecast Bullish on FX Options Sentiment
- Apr, 30 Forex Options Markets Point to Further USDJPY Gains
- Apr, 16 Japanese Forecast to Rally on sharp Shift in Sentiment
- Apr, 05 US Dollar Forecast to Rally Further Against Japanese Yen
- Mar, 24 US Dollar Forecast to Rally Further on Shift in FX Options
- Mar, 17 US Dollar May Fall Further Against Euro, Australian Dollar
- Mar, 10 Euro Forecast to Recover Against US Dollar on Options Sentiment
- Feb, 24 US Dollar Forecast to Gain, but Watch for Corrections
- Feb, 17 US Dollar to Decline on Extreme Forex Positioning
- Feb, 10 US Dollar at Risk of Pullback Within Longer-Term Rally
- Feb, 04 US Dollar Forecast Remains Aggressively Bullish on Forex Options
- Jan, 27 US Dollar Forecast Bullish on One-Sided Futures Positioning
Forex market positioning shows traders very heavily long the US Dollar against the Euro, warning of short-term pullbacks in the context of a broader rally. Indeed, it has become increasingly difficult to bet on further US dollar strength given months of strong gains.
Forex market positioning shows traders very heavily long the US Dollar against the Euro, warning of short-term pullbacks in the context of a broader rally. Indeed, it has become increasingly difficult to bet on further US dollar strength given months of strong gains. Already we see pairs such as the Euro/US Dollar bouncing off of their lows, and very short-term momentum points to further US Dollar losses. Yet elevated volatility expectations ahead of end-of-week US Nonfarm Payrolls data warns of strong and unpredictable price moves. Monitor position size ahead of the infamous NFP release.
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Euro / US Dollar Options Analysis
Speculative Forex Futures positioning remains very heavily net-long the US Dollar against the Euro, warning of short-term corrections within the context of a broader recovery. Indeed, the most recent CFTC Commitment of Traders data shows Non-Commercial traders at a record net-short the EURUSD. Forex options market risk reversals have nonetheless bounced considerably off of their lows, and it seems that many are beginning to hedge against and bet on Euro strength/Dollar weakness. Watch for short-term corrections, but the overall trend points to further EURUSD lows.
British Pound / US Dollar Options Analysis
Net speculative positioning on the British Pound is quite similar to that of the Euro, with Non-Commercial traders very much net-short the GBP/USD. Similar one-sided extremes in forex options risk reversals suggest that the GBP/USD may consolidate through the near-term in the context of a broader decline. FX Options risk reversals likewise show that traders have quite aggressively bet on further British Pound weakness. The clear difficulty is placing any GBP/USD short trades. Risk/reward warns that the GBP/USD could bounce noticeably before continuing its decline.
US Dollar / Japanese Yen Options Analysis
Forex futures and options give slightly mixed signals on the US Dollar/Japanese Yen currency pair, giving little indication of what to expect through short-term trade. Futures positioning shows traders marginally net-long the Japanese Yen (short USDJPY) through recent trade, while risk reversals are effectively neutral. The broader trend points to USDJPY losses, and there is little evidence of a potential short-term bottom.
US Dollar / Canadian Dollar Options Analysis
Forex futures traders remain fairly aggressively long the Canadian Dollar against the US Dollar, and a recent shift in risk reversals shows many are betting on further USDCAD weakness. Some weeks ago we argued that severely one-sided positioning pointed to slower USDCAD declines. Yet positioning has since moderated significantly, and there is arguably further room for the USDCAD to go lower. The sharp shift in risk reversals likewise supports the case for USDCAD weakness.
US Dollar / Swiss Franc Options Analysis
Non-Commercial futures positioning on the US Dollar/Swiss Franc pair recently flipped to net-long the US Dollar against the Swiss Franc—a considerable shift from previously one-sided USD short extremes. The speed at which markets flipped direction is clear signal that the overall tide has shifted, but as with the Euro, one begins to question whether the USD rally has occurred altogether too quickly. The clearly one-sided positioning makes it difficult to bet on further US Dollar strength given the considerable risk of short-term pullback.
Australian Dollar / US Dollar Options Analysis
Forex Futures and Options positioning on the Australian Dollar paint a mixed short-term picture for the recently high-flying currency. Non-Commercial traders—typically speculative in nature—remain heavily net-long the Australian Dollar against its US namesake. All the while, FX Options traders had recently hit bearish extremes and have since pulled back. The considerable shift in risk reversals suggests that the recent rally may continue through the near term, but clearly one-sided futures positioning paints a bearish picture overall. Look for consolidation through near-term trade.
New Zealand Dollar / US Options Analysis
A noteworthy shift in New Zealand dollar futures positioning suggests that the pair’s impressive declines may slow, but we remain long-term bearish the previously high-flying carry trade currency. Futures traders have heavily trimmed their one-sided New Zealand Dollar longs through recent declines. All the while, forex options risk reversals dropped to clear bearish extremes and have since bounced. All in all, we see scope for longer-term NZD pullbacks within the context of a broader financial re-pricing of risk. Yet we could see short-term NZD bounces and consolidation given market indecision.
Written by David Rodríguez, Quantitative Strategist for DailyFX.com, drodriguez@dailyfx.com
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