BofA notes a significant shift in FX positioning this year, with USD longs being reduced by 40%, while JPY and EUR positions have increased. The market remains net long USD but with less extreme positioning, while EUR/USD shorts have moderated to post-COVID averages.
Key Points:
1️⃣ USD Longs Reduced, but Still Present ?
The year began with stretched USD longs, particularly against CAD, CHF, and SEK.These positions have been cut but remain net long.2️⃣ JPY Longs Have Increased ?
The market has flipped from slightly short to long JPY.This aligns with price action, as investors join the upward JPY trend.3️⃣ EUR/USD Shorts Moderating ??
EUR/USD remains net short but is no longer at extreme levels.Short positioning has reverted to its post-COVID average.4️⃣ SEK an Outlier, Investors Skeptical on Rally ??
Despite SEK appreciation, investors remain cautious about its sustainability.BofA is long EUR/SEK via options, suggesting they expect SEK weakness.Conclusion:
FX positioning has realigned with recent market trends, with investors trimming USD longs and increasing JPY and EUR exposure. While the market remains short EUR/USD, the positioning is less stretched, reducing the risk of aggressive short-covering rallies.
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