Summary:

• Net short positioning on GBP vastly covered on the back of hawkish BoE
• Longs on NZD trimmed in the run-up to the general election
• AUDNZD could be an interesting selling opportunity

The latest CFTC came out as usual on Friday and brought some moves worth looking at. First and foremost, let’s add that the report covered transactions until 19 September, hence an impact of a string of hawkish remarks from the BoE was visible. In effect, the net short positioning on the pound was trimmed from 46k to just 10k – the lowest level since September 2015.

The net short positioning on the GBP is already the lowest since September 2015. Source: Bloomberg

Moving on, noteworthy moves occurred in the Antipodean currencies. Firstly, the AUD experienced another boost of its net long positioning which increased from 63k to 72k. It’s a clear signal that traders have bet on a hike by the RBA possibly due to two hikes delivered by the Bank of Canada. Notice, both banks have tended to move their rates at the similar time more or less, thus it could have been a reason to pile up net longs further.

AUD registered another increase of its net long positioning in the week ended 19 September. Source: Bloomberg

Finally, net longs on the New Zealand dollar were pared over the course of the past weeks. The general election could have been one of the reason to be cautious. On the other hand, the latest reading of GDP growth for the second quarter met expectations. Of course the RBNZ is still a long way off from a rate increase, though the RBA doesn’t seem to be in a much better position. What’s more, given the Communist Party congress scheduled on 18 October there are mounting risks that possibly artificially fueled increases on the Chinese stock exchange could fade away, therefore it could unlock space for depreciation for the Australian dollar. The NZD, even it’s correlated to its peer from Australia, seems to be less exposed.

Investors have been gradually trimming their longs on the NZD in the run-up to the general election. Source: Bloomberg

On the flip side, the NZD could be under some pressures going forward as some time will be needed to forge the new government. Keep in mind that the ruling National Party was short of votes to obtain a mandate to put together a new government on its own. However, it needs to be underlined that nobody had expected that a hung parliament would have been avoided. Nevertheless, the jury is still out as the final election’s fallout is expected to be announced on 7 October.

The AUDNZD declined three weeks in a row breaking a short-term support line. Source: xStation5

Technically, the AUDNZD has marked three bearish candlesticks of late, hence today’s corrective move (fueled by a post-election sell-off on the kiwi) might be temporary. If the price is able to maintain below 1.0970, it could bode well for further decreases going forward. Bear in mind that the positioning could be in favor of that scenario.