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Forex Flash: Some short covering in JPY and EUR - Nomura

FXstreet.com (Barcelona) - Nomura strategists have taken a look at Friday´s COT positioning data and note that there has been some short covering in JPY and EUR.

The begin by noting that key positioning changes this week were almost the morror image of the moves last week which saw partial EUR and JPY short covering by speculators on an aggregate basis. They see that overall positions are now at -$8.3bn for the EUR and -$9.8bn for the JPY. Their real time indicator shows a slight reversal in both as shorts were added to both EUR and JPY. Overall, they see that there was selling of USD in line with general price action, though spec investors remained long the dollar (+$21bn).

Looking more specifically at JPY, they see that the positioning remains net short at 78k contracts, but there was likely some profit taking after the large post-BOJ move in the currency. At the same time, it appears some investors shifted their exposure to option format (seen in the volatility skew) likely due to the speed of the move. Looking to EUR, they add that there was some short covering, some 15k contracts bringing overall positioning to -15k contracts, and market price action confirmed this trend, as US economic data was weak. Finally, looking to GBP, they add that there was continued short GBP position adding, after the small reversal last week, and they have now seen speculators selling of GBP in all but two weeks in 2013. They write, “Overall shorts reached $6.7bn after an increase of $0.6bn this week.”

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