CME Group FX Position Watch: Leveraged Funds Materially Change EUR/USD Positioning
- Leveraged funds have materially trimmed their bearish EUR positioning, while asset managers have increased their bullish EUR exposure by about 15%. This is the biggest position among leveraged funds and asset managers.
- Throughout 2024, EUR/USD has traded in a ~1.06/~1.11 range, with the price peaking at the beginning of the year and troughing in mid-April. The past year’s trading range has been ~1.0450/~1.1250. CME Group data on option strikes is balanced between upside and downside demand in EUR/USD.
- The FX volatility curve using CME Group options data suggests investors are relatively calm.
The year began with EUR/USD trading above 1.10, driven by dovish market expectations for U.S. interest rates. The pair dipped to ~1.07 in mid-February, bounced into a ~1.0750/~1.0950 range for the next two months, and has traded between ~1.06 and ~1.09 since mid-April.
Leveraged funds have materially trimmed short EUR exposure, cutting net shorts from -52.3K contracts to -6.1K contracts (Chart 1). Beyond EUR, leveraged funds trimmed short JPY positioning, flipped from small short to small long GBP, and have increased bearish CAD exposure.
Meanwhile, asset managers have become more bullish EUR, increasing long EUR exposures to +283.2k contracts from +244k in early May (Chart 2). They are bearish all other currencies, although this positioning is more modest than in EUR.
Macro Hive Take: Rangebound price action in EUR/USD has made trading the pair difficult. Our bias remains to sell EUR/USD, although we wait for better levels. Both real money and hedge funds have been buying euros in recent weeks, partly based on a narrative shift away from U.S. growth exceptionalism to growing belief in a European rebound. However, we do not expect this theme to dominate ahead. We think U.S. economic prospects remain superior to that of the Eurozone and, as such, prefer USD to EUR.
