The USD continues to struggle versus the funding currencies, with EURUSD holding above 1.10 and USDJPY hovering around 113, notes BNP Paribas.
"Price action suggests markets remain wary of possible feedback loops from a stronger USD and are unwilling to rebuild long positions, wellaware that USD gains could diminish Fed appetite for tightening, aggravate CNY devaluation pressures, and short-circuit the commodity currencies.
Our BNP Paribas FX Positioning Analysis indicates a new peak for USD shorts at -12 – the largest short since Q4 2013. Still, -12 is only a moderate short and there is plenty of scope for this to increase further," BNPP argues.
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