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Specs Cashing In US Dollar Longs

There has been significant price action during Monday and also a shift from recent trading patterns. Despite a fairly downbeat US ISM manufacturing survey, risk currencies have not been subjected to significant selling pressure.

The most notable feature is that USD/CAD has dropped below 1.3950 even as crude oil prices have declined by over 5% on the day.

The Australian dollar, New Zealand dollar and Sterling have also all out-performed and these currencies all share the feature that speculators were holding short positions in the latest CFTC data.

This clearly suggests that specs may be exiting long dollar positions. This has potentially very important implications given that the biggest speculative long position is for dollars against the Euro.

The recent price action and potential for an erosion of dollar longs suggests that EUR/USD could be pushing higher over the next few days even with dovish ECB comments.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.