After several weeks of fairly dry reports, the CFTC reported quite strong changes in the mood of speculators. The total short position on the dollar fell by almost $11 billion in the reporting week, to $12.7 billion, and this is the smallest total position since June. The reduction of the long position in the euro continues, but the yen experienced the strongest decline, which went into negative territory, while the short position formed by almost 40,000 contracts is the maximum for the year.
Taking into account the fact that commodity currencies generally maintained long positions against the dollar, we can assume that the dominant scenarios this week will be, first, the strengthening of the US dollar, and second, the decline of the yen, euro, and franc - currencies that traditionally have an inverse correlation with the dynamics of commodity prices.
On Friday, the Fed still announced a decision not to extend the rule that allowed banks to maintain a lower level of capital. Actually, the decision was expected on Wednesday, but the Fed separated two important events in time, so as not to provoke a resonant reaction of the markets. This decision will make life more difficult for banks, which, instead of buying back government debt, can sell some of the assets in treasury bonds to meet the capital requirement. Of course, the Fed hopes that the banks are sufficiently capitalized and will not sell off T-bills, but in any case, this is a step towards increasing the negative, which in the end can increase the demand for the cash dollar and will contribute to a bullish sentiment for the dollar.
EUR/USD
Europe is facing the threat of a third wave of coronavirus, a threat that has grown stronger over the past few days amid the AstraZeneca vaccine scandal. As a result, Germany announced no intention to reduce restrictive measures, France tightened quarantine in 16 regions for 4 weeks, and there are concerns that the previously announced goal of achieving herd immunity by the summer may not be achieved.
The net long position on the euro declined over the reporting week by another 1.781 billion, to 13.387 billion, while the yield spread continues to grow in favor of the dollar, which adds to the negative for the euro. The estimated price is looking down confidently.
There is no reason for the euro to resume growth since most of the parameters - both speculative and political - are in favor of a further decline in the European currency. We assume that in the coming days the pressure on the euro will only increase, the nearest target is 1.1835, in the long term - 1.1600/20.
GBP/USD
Until recently, the pound was under the influence of positive factors that pushed it up. These include higher vaccination rates than in the US, and even more so in the eurozone, the development of a road map to get out of restrictions, and successful budget readings in parliament. The GfK consumer confidence index rose in March from -23p to -16p.
The growth of the index was supported by the stabilization of personal savings (the best in 3 years, according to GfK), an improvement in the economic outlook, which is expected to translate into an increase in consumer spending.
However, the positive is overshadowed by the latest data, which can cause severe damage to the pound. The National Health Service of the United Kingdom has warned local health organizations about a "significant reduction in the weekly supply" of covid vaccines, primarily AstraZeneca, which ultimately jeopardizes the implementation of the roadmap for getting out of restrictions.
The net futures/options long position on the pound decreased by 461 million during the reporting week, and the strong growth in the yield of US T-bills contributes to the growth of the yield spread in favor of the euro. The reversal of the target price has taken place, accordingly, we should expect confirming technical signals soon.
Seemingly, the breakout of the support of 1.3778 may happen soon, after which the fall will accelerate. The long-term target is the 1.3440/90 resistance zone.
