The latest CFTC data suggests that the investment community is now net neutral on the Euro, with short interest more recently spilling over into emerging market & commodity currencies. Short interest in gold also continues to build.
For now it seems that investors just find the Euro too hard, with the recent stability in the Euro/USD cross and in sovereign yields in the region pushing punters to look elsewhere.
The more recent gyrations in the Yen don't appear to be due to short covering on the CME, although that is perhaps what has driven the more recent rally back well below 100 yen.
It is surprising how sensitive the market has been to the lack of additional guidance on QE from the BoJ, particularly given that what they have already announced is gigantic in the context of previous programs.
The pound has been surprisingly strong recently despite little change to the the balance of bulls and bears on CME.
The big potential catalyst on the horizon will be the introduction of Mark Carney as the head of the Bank of England, who has been seen as having somewhat more radical ideas on monetary policy than the outgoing Governor Mervyn King.
The risk for me is that this shakes up views on the downside risks to the pound in the next month or so.
The Australian dollar has been one of the worst performing currencies more recently, but if the CME data is to be believed, this is more due to a liquidation of longs rather than an increase in short interest, although the latter has been large.
I think that short interest in the AUD will continue to grow as growth continues to slow. While forecasts are being revised down and recession potential discussed, I think there will be increasing concern about some of the bigger risks of a nastier downturn driven by Australia's perceived vulnerabilities.
Gold is also seeing increased short interest as talk of tapering QE continues to mount. I think its overdone and perhaps gold will see some short covering gains, although the sell off in bond markets suggests gold wont get back to where it was at the start of 2013 in a hurry.
Not all precious metals are being impacted by the same dynamics as gold, with the PGMs faring relatively well. In particular, there is no short interest in palladium at present and longs have been rebuilding. While palladium has pulled back more recently on general market weakness, it does appear the investment community is still very positive on this metal.
