Summary:

• The JPY net short positioning increased 15k being the largest since January 2014
• Net longs on the AUD surged 14k on mounting expectations in terms of a possible rate hike
• Wheat’s positioning little changed despite a decline in prices

As we’re beginning a new trading week it’s worth taking a closer look at recent changes which occurred in the positioning across miscellaneous markets. At first, let’s begin with shifts of note in the currency market, then we’re going to move to commodities.

There is no doubt that the Australian dollar has been one of the hottest currency among its G10 peers of late. The AUD has gained momentum following a discussion that a neutral nominal rate could rise towards 3.5% implying as much as 200 bps monetary tightening. However, bullish moods were cooled off on Friday as RBA’s Debelle contested an importance of such discussion adding that the higher exchange-rate works against benefits of quicker global growth.

The AUD net long positioning surged 14k in the week ended 18th July approaching its highest levels registered in the last year. Source: Bloomberg

Either way, the AUD net long positioning soared 14k in the week ended 18th July, hence a Debelle’s speech has not been taken into consideration. On that account, we’re already close to multi-month peaks where the price has gotten back several times. Allowing for an inflation reading scheduled for this Wednesday, one could suppose that some traders might decide to cash in on their recent longs. Let us recall that a Wednesday’s release will be for Q2 (it’s reported quarterly not monthly, hence its impact could be even more significant).

The net short positioning on the JPY rose and neared the lowest level seen in the past years. Source: Bloomberg

On the other hand, the Japanese currency experienced another wave of rising shorts which could encourage some traders to change their mind with regard to the nearest future of the JPY. Having the so low positioning there is increasingly likely that we’ll have a rebound sparked by an adjustment in investors’ portfolios sooner or later.

Weighing the positioning on the AUD against that seen in the JPY at the same time, one could assume that a short on the cross could turn out noteworthy. In order to be better prepared to trading let’s glance at a technical analysis of the AUDJPY which can tell us something more about timing.

An ominous candlestick was drawn in the chart of the cross which could foretell worse performance of the pair in the near-term. Source: xStation5

Technically the AUDJPY could be prone to a short-term pullback given a weekly time frame. There was a bearish candlestick last week which emerged at a critical resistance area. Having said that, one could expect a shallow corrective move once AUD traders choose to square their positions before the Australian CPI reading. Taking account of a broader outlook though, the pair could keep up rising on diverging market rates which should increase a capital influx towards the Australian’s economy. Let us remind that we already mentioned a possible short position on the NZDJPY last Monday.

Besides, it’s worth pointing to a shift which took place in the Canadian dollar where the net positioning turned long for the first time since March this year as traders were prompted to pile up their longs on the CAD in the aftermath of an interest rate hike delivered earlier this month. That said, the latest inflation reading could have raised some concerns about a pace of rate hikes going forward.

While the net positioning in wheat was little changed last week, it holds onto its elevated levels which could cause wheat prices to struggle to rise much further. Source: Bloomberg

At the end of the day, let’s have a look at the wheat market which is the most stretched compared with corn or soybean. We are already close to multi-year levels which could contest larger gains on the commodity. However, the net long positioning has been quite resilient to more noticeable declines in wheat prices so far, thus buyers could appear once again when the price achieves a relevant technical level and concerns about crops in the US remain in place.