Dollar Slide Continues, AUD Shorts Slashed

Early trading this week continues the trend of USD weakness with the euro up 20 pips. Last week, the Swiss franc was the top performer while the US dollar lagged. The Asia-Pacific calendar is light to start the week but comments from Mester and SNB sight deposits are up later. CFTC data showed a major drop in AUD shorts.

Part of the reason for the early-week rise in the euro was the results of the French departmental elections. The anti-euro National Front was expected to lead the first round but was about 5 points behind Sarkozy's UMP with a second round to be held next Sunday.

Comments from PBOC leader Zhou may have dampened enthusiasm for rate cuts. He said “excessively loose monetary policy” would not be favorable for structural reforms.

Oil will be in focus after a series of headlines on Iran. Obama and Kerry said significant gaps remain before a nuclear deal can be completed but both sides seemed optimistic a deal could eventually be reached. Iranian oil finds its way to market but a deal would make it easier to export to the west and may weigh on Brent and WTI.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +.

• EUR -194K vs -181K prior
• JPY -48K vs -59K prior
• GBP -38K vs -33K prior
• AUD -29K vs -77K prior
• CAD -33K vs -39K prior
• CHF -2.2K vs -8.4K prior 

In general, US dollar longs were pared ahead of the FOMC and that turned out to be a smart move but the market was still very-long USD and it showed after the decision. The other standout is the race out of Australian dollar shorts in another well-timed move.