Kiwi Turnaround in Focus, Specs Like CAD

It's a big week for US economic data and earnings but the most intriguing event could be the RBNZ interest rate decision. The kiwi was the worst performer last week while the yen topped the charts. Weekly positioning data shows a surprising bet on the loonie.  Geopolitical risks dominated markets late last week but some positive signs on the US economy are emerging and the policy hawks are beginning to make noise about Fed ZIRP and QE.

Higher inflation and better durable goods orders will push Yellen closer to talking about rate hikes and boost the US dollar.

For traders looking for more volatility the kiwi could be spot. It fell hard last week after CPI rose just 1.6% y/y compared to 1.8% expected. Ahead of the report the OIS market was pricing a virtual certainty that Wheeler would raise rates Wednesday but that has fallen to 82%.

Technically, NZD/JPY stalled out near the highs of the year and NZD/USD has turned sharply lower after a failure to break the 2011 highs. A surprise from the RBNZ would really get the kiwi moving lower, and that's something Wheeler & Co would love to see.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -63K vs -59K prior JPY -63K vs -66K prior GBP +39K vs +42K prior AUD +40K vs +37K prior CAD +16K vs +10K prior CHF -6K vs -7K prior NZD +15K vs +14K prior

There isn't too much to takeaway from this week's report but it's a bit surprising to see cable longs cut so quickly as the pound flirts with long-term highs.

The shift into Canadian dollar longs has been rapid and nearly all of those trades were underwater on Wednesday at the USD/CAD highs. Good news for the US dollar (perhaps CPI or durable goods this week) could give the dollar some life and launch the squeeze.