The latest CFTC data recorded a further increase in long speculative dollar positions together with a decline in long Euro positions which will also make it more difficult for the US currency to make headway as EUR/USD initially consolidated close to 1.35 in Asia on Monday.
Risk appetite held generally firm during the day with some optimism over China’s reform programme following the more detailed announcements late last week. Despite this, USD/JPY edged back to the 100 level as the yen gained some respite on the crosses. The speculative positioning data also registered a heavy short yen position which made players reluctant to chase the yen weaker.
The dollar was unable to gain any significant traction into the European session as buyers looked to tease away at EUR/USD resistance levels above the 1.35 area. The US currency was still being hampered by dovish testimony from the Fed’s Yellen last week.
The Euro also proved resilient in the face of speculation that the ECB could be prepared to unleash some form of quantitative easing over the next few months. There were very solid Euro-zone surpluses for trade and current accounts for October which will provide currency support, but also maintain political friction over German exports. EUR/USD held firm and moved to highs near 1.3540 early in the New York session.
There were only very limited data releases during the day with the NAHB housing index holding steady at 54 for October compared with expectations of 56 while there was a recovery in long-term capital inflows into the US for September even though there was a big outflow of short-term capital.
EUR/USD edged back from intra-day highs as USD/CHF found support below 0.9100, but there was little conviction in dollar buyers at this point, especially after being burned in September.
After making an early break higher to test resistance close to 1.6150 against the dollar, GBP/USD was subjected to profit taking and retreated to test support below 1.61 as EUR/GBP moved to test resistance near 0.84. Underlying Sterling sentiment held firm on expectations that a robust housing sector could force the Bank of England into early monetary tightening.