USD longs were reduced before Yellen - ANZ

Analysts at ANZ explained that the leveraged funds reduced their net long USD positions ahead of US Federal Reserve Chair Yellen’s Jackson Hole speech. 

Key Quotes:

"This is the third consecutive week that funds have been net sellers of USD despite some hawkish comments from a few Fed officials. Leveraged funds’ overall net long positions in USD fell by USD3.6bn to USD10.8bn, the lowest in six weeks.

EUR saw the largest net buying, followed by JPY. The USD2.3bn of net EUR buying was the highest since February 2016, and reduced leveraged funds’ overall net short positions in the single currency to USD13.3bn. Net long JPY positions rose by USD0.8bn to USD6.1bn.

GBP selling continued into its eighth consecutive week, albeit at a slower pace. Net short GBP positions rose by USD0.1bn to USD5.9bn. Despite the selling by leveraged funds, GBP/USD appreciated during the period due to better than expected economic data including a pick-up in retail sales and consumer confidence.

It was a mixed bag for commodity currencies. Although CAD saw net buying worth USD0.3bn, leveraged funds remained overall net short for the third consecutive week at USD0.4bn. Meanwhile, funds reduced their net long AUD position by USD0.1bn despite strong July labour force numbers. NZD positioning was little changed from the previous week.

EM currencies saw a combined net buying of USD0.3bn, led by MXN.

 Looking ahead, Yellen’s comments at Jackson Hole, which argued that the case for a rate rise has strengthened in recent months, and Vice Chair Fischer’s agreement with Yellen’s comments, are consistent with a possible hike in September, should see long USD positions getting rebuilt."