FX Quant and Positioning Weekly

January 15, 2018

Quant and Positioning Weekly

Main findings

Speculative positioningLeveraged fund switch to net long EUR positioning

Specs added to their already record net long EUR position

More importantly leveraged fund traders switched from a small net short to a small net long EUR position.

With the fast footed leverage funds just joining the positive EUR sentiment a continued quick rise in EUR/USD would not be surprising.

Economic surprise indicesSomewhat weaker US dataThe US index corrected somewhat lower last week but is still at an elevated level why a continuation is expected which would weigh on the already weak USD.

Price trend and stretchesGenerally weak USD and strong Scandies

Main take away from the monthly trends is that USD continues to trade on the weak side.

Scandies on the other hand posts the strongest trends vs USD.

SEB short-term fair valuesEUR/USD and GBP/USD at elevated levels

Both EUR/USD and GBP/USD rose far sharper than their respective short-term fair value (STFV) on Friday.

Though, as their STFV also rose, the downside pressure is temporarily mitigated.

The development should however be closely followed as the change/risk of a correction is getting larger.

1

Quantitative measures

Speculative Positioning: Currencies (Jan 3-9)Normalization• Large net increase in AUD positioning

brought specs back to a net long AUD position.

• Large net increase in NZD positioning –but specs are still net short.

Heading for the extreme• EUR at a new all time large net long

position after third straight net increase.• GBP positioning at largest net long since

Sep 2014 after a second straight increase.

FX exposure• The amount of contracts held was

reduced thus changes in the net positions were more due to specs scaling down on previous engaged positions as.

Net position deviation from averageNormalized change in net position

Speculative Positioning tableAmount of contracts held by speculators

2

50 46

3733

16

-20

-27

-39

-44-50

-40

-30

-20

-10

0

10

20

30

40

50

AUD NZD GBP EUR CAD JPY MXN Net USD CHF

Perc

entil

e de

viat

ion

from

med

ian

(max

50/

min

50)

EUR GBP CAD MXNNetUSD

NZD CHF AUD JPY

Previous 1.42 1.43 0.14 -0.16 -0.08 -1.11 -0.49 -2.25 -1.42

Current 1.64 1.60 0.18 -0.29 -0.31 -0.75 -1.10 -1.26 -1.48

1.6 1.6

0.2

-0.3 -0.3

-0.8

-1.1-1.3

-1.5

-2.50

-2.00

-1.50

-1.00

-0.50

0.00

0.50

1.00

1.50

2.00

Stan

dard

dev

iatio

ns fr

om 5

2 w

eek

aver

age

Current Previous Change Current Change Max Min Max Min

AUD 5,458 -20,026 127% 16 100 77,194 -20,026 77,194 -76,851

CAD 17,461 14,739 18% 47 66 76,392 -99,109 76,392 -99,109

CHF -21,922 -16,232 -35% 12 6 1,440 -30,184 10,867 -30,184

EUR 144,691 127,868 13% 100 83 144,691 -66,500 144,691 -226,560

GBP 25,492 16,235 57% 100 87 25,492 -107,844 25,492 -107,844

JPY -125,536 -121,766 -3% 6 30 -26,869 -135,999 71,870 -135,999

MXN 29,797 35,058 -15% 31 23 116,998 -73,321 116,998 -267,020NZD -11,017 -16,985 35% 35 96 35,981 -17,586 35,981 -19,654Net USD -64,424 -18,891 -241% 45 11 310,475 -267,020 439,842 -267,020

0-25th percentile 50-75th percentile

25-50th percentile 75-100th percentileSource: CFTC. Percentile ranks calculated using data one year back.

1y 3yNet non-commercial positions Percentile ranks

Quantitative measures

Speculative Positioning: EUR vs USD• The COT report* shows the largest

net long EUR position ever.

• Getting quite EUR bullish even if use a better long-term comparison gauge (long contracts share of total contracts): Highest level since June 2011

• The TFF report** shows that the latest push higher supported both by Leveraged funds (which switch back to a net long EUR position) as well as Asset managers (already with a very net long position).

* Commitment of traders showing all speculators positioning

*** Traders in Financial Futures shows speculators divided into categories

Bullish but not as extreme using a better gaugeLargest net long EUR position ever

More structural longs from asset managersLeveraged fund with fresh net short

3

Quantitative measures

Speculative Positioning: Other assets CFTC COT report, Jan 3-9

• Positioning in the 5y and 10y US government bonds have fallen in line with rising yields.

• Fresh record high net long oil position as oil prices broke above 60 for the first time since mid-2015.

• Fourth straight increase in the net long gold position and momentum is increasing.

5y US Government bond10y US Government bond

GoldOil

4

Quantitative measures

Economic surprise indices• The SEK index corrected

somewhat higher last week even though inflation came in line with expectations of Friday.

• The USD index continued to correct lower but is still at an elevated level (92nd percentile) why further correction is expected.

SEKPercentile deviation from median

NOKUSD

5

42.1

-29

-50 -40 -30 -20 -10 0 10 20 30 40 50

USD

NOK

CHF

EUR

NZD

CAD

GBP

AUD

JPY

SEK

Current week Current week Previous Previous

Quantitative measures

Short-term fair values and rate spreadsShort-term fair value tableDeviation from STFV

EUR/NOK about to correct higher?EUR/USD flying higher but drivers also push STFV somewhat

higher lessening the valuation downside pressure

• EUR/USD has rapidly built a new EUR overvaluation but as STFV also heads higher the downside pressure is somewhat mitigated.

• GBP/USD rose sharply Friday in line with the EUR/USD development but way ahead of its general drivers.

• EUR/NOK headed higher on Friday and seems ready to continue to correct higher initially to the lower minor signal level at 9.70 (-0.8 St Dev level).

6

-4 -3 -2 -1 1 2 3 4

USD/NOK

EUR/NOK

USD/SEK

USD/JPY

USD/CAD

AUD/USD

EUR/SEK

EUR/PLN

EUR/CHF

NZD/USD

GBP/USD

EUR/USD

Upside deviation today Upside deviation y-dayDownside deviation today Downside deviation y-day

Ccy StDev STFV Y-day close 15-Jan Correction potential Trend

EUR/SEK 0.2 9.8049 9.8228 9.8302 -0.3% EUR/NOK -1.0 9.8360 9.6636 9.6680 1.7% EUR/USD 1.7 1.2044 1.2202 1.2275 -1.9% GBP/USD 1.6 1.3532 1.3728 1.3784 -1.8% NZD/USD 1.4 0.7092 0.7242 0.7294 -2.8% AUD/USD -0.3 0.7946 0.7917 0.7953 -0.1% USD/JPY -1.0 112.17 111.06 110.59 1.4% USD/CAD -0.6 1.2524 1.2459 1.2433 0.7% EUR/CHF 0.5 1.1764 1.1800 1.1796 -0.3% EUR/PLN 0.4 4.1604 4.1719 4.1698 -0.2% NOK/SEK 1.9 0.9968 1.0163 1.0165 -2.0% USD/SEK -1.0 8.1406 8.0495 8.0077 1.6%USD/NOK -2.4 8.1664 7.9203 7.8757 3.6%

Quantitative measures

Trends & Stretches• Weak USD continues according

to trend and stretches

• USD/NOK, USD/SEK lower and EUR/USD higher are the strongest trends

• Downside EUR/PLN and upside GBP/USD are the largest stretches

FX Trend-o-meterFX Stretch-o-meter

FX-o-meters sorted by strength of trendEUR/USD with the strong 20d trend but also quite stretched

7

-2.3-2.1

-1.6-1.0

-0.8

-0.7-0.6

0.00.2

0.2

0.50.5

1.01.3

1.8

1.82.0

-3 -2 -1 0 1 2 3

USDNOKUSDSEKUSDCADEURNOKUSDJPYEURSEKEURPLNEURNZDEURAUDEURCADNOKSEKEURGBPEURJPYGBPUSDNZDUSDAUDUSDEURUSD

Standard deviations

-1.6

-1.2

-1.1

-1.0

-0.7

-0.5

0.4

1.0

1.0

1.0

1.1

1.3

1.3

1.3

1.7

1.8

2.6

-4 -3 -2 -1 1 2 3 4

EURPLNUSDSEK

USDNOKUSDCADUSDJPYNOKSEKEURGBPEURNZDNZDUSDEURSEK

EURNOKAUDUSDEURAUDEURJPYEURCADEURUSDGBPUSD

Standard deviations

Current

Prior week

CCY P air T rend S tretch V ol 20d rank 15-Jan M A(200dUS DNOK -2.30 -1.14 -0.11 20 7.8856 8.1838US DS E K -2.07 -1.19 -0.01 20 8.0182 8.3761E URUS D 2.00 1.80 -0.05 1 1.2256 1.1568AUDUSD 1.84 1.27 -0.47 1 0.7944 0.7707NZDUSD 1.80 0.96 -0.25 1 0.7285 0.7110USDCAD -1.61 -0.97 -0.24 18 1.2436 1.2855

GBP US D 1.29 2.57 -0.21 1 1.3771 1.3096

E URJP Y 1.01 1.33 0.02 3 135.6300 129.2556EURNOK -0.99 1.08 -0.02 15 9.6654 9.4620

USDJPY -0.80 -0.68 -0.29 20 110.6500 111.6910EURSEK -0.68 1.05 -0.12 10 9.8280 9.6822EURPLN -0.56 -1.63 -0.17 12 4.1700 4.2284

EURGBP 0.52 0.37 -0.45 2 0.8900 0.8828

NOKS E K 0.46 -0.46 0.23 1 1.0166 1.0215

E URCAD 0.25 1.66 -0.14 2 1.52 1.49

EURAUD 0.18 1.27 -0.31 3 1.5427 1.4996EURNZD -0.04 0.95 -0.22 14 1.68 1.63

Charts

Short-term valuation

8

Charts

Positioning vs USD

9

* Versus G10 only

Charts

Economic data surprises

10

Positioning details

AUD vs USD

11

Positioning details

CAD vs USD

12

Positioning details

CHF vs USD

13

Positioning details

EUR vs USD

14

Positioning details

GBP vs USD

15

Positioning details

JPY vs USD

16

Positioning details

NZD vs USD

16

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