US Dollar Index: Net positioning on the Dollar Index improved on the week, but a closer look at overall implied open interest saw the USD fall into heavily net short territory through the same period. Overall implications are somewhat unclear. If positioning continues further into negative territory, our calls for a DXY bottom at 81.25 will likely prove immature. If, on the other hand, the COT shows a dollar speculative improvement, price may return to theUSD?s favor. [B]
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[B] EUR: Euro net longs stayed almost exactly unchanged through the week, coinciding with a definitively rangebound EURUSD trading environment. As mentioned last week, recent action looks like a blowoff top may have formed, similar to those in December and May of 2006. Yet an early-week EURUSD rally may indicate that an upward correction may take place before continued declines. Net Speculative longs below record-highs increase the likelihood of this scenario.
[/B][B]GBP: Overall trends remain towards GBP selling, but a sudden rebound in net speculative positioning suggests that we may seefurther topside correction before continued declines. A retest of multi-decade highs cannot be ruled out, but it serves to note that there exists a large divergence between price action and positioning?leaving medium term risks to the downside for the GBPUSD.
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CHF:[/B] Speculators scaled back CHF shorts from recent mult-month highs, ind icating that a short-term correction may be taking place. Such a development increases the likelihood for a test of range-bottoms below 1.2000 through the coming weeks. The Swiss Franc remains in a wedge formation, with a break in either direction to ind icate the likely medium-term trend.
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JPY: Speculators scaled back JPY shorts on the week, but overall positioning remains in overstretched territory. Implied USDJPY longs remained above their 12-week moving average?signalling that a turn down could bringfurther medium-term declines. A sustained hold of the psychologically and technically significant 122.00 increases the likelihood of a multi-month top.
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CAD: [/B]Speculators grew a record net-long the Canadian dollar, indicating that positioning has reached definitively extreme territory. As we wrote last week, “Historically, the trend will continue for a few more weeks before the percentile ind icator rolls over from above 90 and a top is in place.” Rapid USDCAD selling shows few signs of slowing momentum, but overdone CAD longs suggests that the currency has little further room to appreciate before a multi-month USDCAD low is set.
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AUD: The trend remained towards AUD selling on last week?s COT data, but a later-week rally suggests that tomorrow?s net speculative result will be considerably more bullish for the Asia-Pacific currency. A return to extreme AUDUSD longs would imply that a retest of significant highs above 0.8400 may be in the cards before any substantive downturn. [/B]