EURUSD: EUR long positioning rises further

According to our FX positioning gauge, the EUR was bought for most
of the last week with speculative-oriented investors such as hedge
funds being the main driver of the latest development. From that angle,
and when considering last week’s price action, it appears that the
single currency was bought on dips. This also implies that the EUR is
now trading in even more overbought territory, with such conditions
keeping corrective downside risk high at around the current levels.
While this keeps us cautious in the near term, our long-term view on
the EUR stays constructive.

Elsewhere, USD long positioning fell last week with real money
investors seemingly being among the biggest sellers. This appears to
be partly on the back of increased political uncertainty as for instance
related to the second stimulus package. With positioning now broadly
balanced, there appears to be less position squaring-related downside
risk left from current levels. However, this does not mean that the USD
does not face further downside risk with strongly capped central bank
monetary policy expectations likely to prevent any fresh buying interest
from rising meaningfully.