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FX Positioning Analysis Summary (26 July 2018)

Core Content

This document provides an FX Positioning Analysis report by BNP Paribas London Branch, authored by Michael Sneyd and Alexander Jekov. It outlines the current market sentiment and positioning scores for major G10 currencies, based on data from the prior five years, rescaled to a -50 to +50 percentile range. Extreme positions are defined as scores above 40 or below -40.

Key Currency Positioning Scores

• USD: FX investors have reduced their long positions from $+23$ to $+16$ over the past week, with the largest reduction in the risk reversal component.
• EUR: The score is at +4, indicating a moderate long position.
• JPY: The score is at +2, suggesting a slight long position.
• GBP: The market remains significantly short at -28, with FX funds holding an extreme short position at -50.
• CHF: The score is at -22, indicating a moderate short position.
• CAD: The score is at -24, suggesting a moderate short position.
• NZD: The score is at -12, indicating a slight short position.
• NOK: Long positions have been cut to +24, while the client survey component remains significantly long at +46.
• SEK: The score is at -14, indicating a slight short position.

Components of Positioning Analysis

The positioning scores are derived from the following components:

• Client Exposure: Internal sales desks' estimate of FX investor exposure.
• IMM (Commitment of Traders): A widely used proxy for US-based hedge-fund/CTA activity.
• Risk Reversals: Reflect the relative price of calls vs. puts, incorporating option market sentiment.
• FX Fund Position Tracker: A regression-based decomposition of currency fund positioning.
• BNPP Trending Indicator: A technical measure of the strength of a currency's momentum.

The overall currency score is calculated as an equally weighted average of these components.

Charts and Visuals

• Chart 1: Overall FX Positioning Analysis.
• Chart 2: Absolute Total G10 Positioning.
• Chart 3: USD Overall Positioning.
• Chart 4: GBP Overall Positioning.
• Chart 5: EUR Overall Positioning.
• Chart 6: JPY Overall Positioning.
• Chart 7: AUD Overall Positioning.
• Chart 8: CAD Overall Positioning.
• Chart 9: NZD Overall Positioning.
• Chart 10: CHF Overall Positioning.
• Chart 11: NOK Overall Positioning.
• Chart 12: SEK Overall Positioning.
• Three-year plot: Shows the historical positioning scores of G10 currencies.
• One-year plot: Illustrates individual G10 currency positioning scores over the past year.

All charts are sourced from BNP Paribas.

FX Strategy Contacts

Legal and Disclaimer Information

• This document is a marketing communication and not independent research.
• It is intended for Professional Clients and Eligible Counterparties under MiFID II.
• It may contain "Research" as defined under MiFID II unbundling rules, which is only available to certain clients.
• The document is for informational purposes only and does not constitute investment advice.
• BNPP may have conflicts of interest and may engage in transactions inconsistent with the views expressed.
• The information is not guaranteed for accuracy or completeness and is subject to change.
• No liability is accepted for any use of the document or its content.
• The document may include simulated performance data and is not indicative of future results.
• It does not constitute a prospectus or public offering and is not suitable for all investors.

Additional Information

• The document may include performance data based on back-testing.
• It may contain references to ETFs, options, and other complex financial instruments.
• It is subject to legal disclosures and restrictions in the U.S. and UK.
• The document is produced by a BNPP group company and is intended for the use of intended recipients only.