US dollar net long positions were little changed this week, affirming a trend in place for the last several weeks since the election of Donald Trump as US president. The value of the dollar's net long position was $28.01 billion in the week ended December 13, marginally down from $28.14 billion the previous week, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.
Kathy Lien, managing director of FX strategy at BK Asset Management, said investors were taking profits on their long dollar position. "Being a dollar bull has paid off handsomely over the past two months with the greenback rising 15 percent against the Japanese yen and more than 7.5 percent against the euro," said Lien.
"Both the speed and velocity of the move has been incredible and when such abrupt fluctuations occur, it is natural to expect profit-taking." She still believes the dollar is a buy on dips, unless US data, Federal Reserve comments, and US interest rates suggest otherwise. Net shorts on the yen rose to their largest since early December last year, at 63,429 contracts.
Data such as Japan's Tankan report on the economy has been weaker than expected, prompting a sell-off in the yen. But declines in the yen should prove supportive of a Japanese economy dependent on exports. The Bank of Japan's monetary policy decision next week could lead to a modest rebound for the yen against the dollar, especially if no changes are made, as expected, said James Chen, head of research at Forex.com in Bedminster, New Jersey.
For the most part though, dollar/yen remains on an upward path. The next major upside targets for the currency pair are the 120.00 yen level followed by the key 122.00 resistance. Sterling net short contracts, meanwhile, continued their decline, falling to 72,343, their smallest since the third week of September. The Reuters calculation for the aggregate US dollar position is derived from net positions of International Monetary Market speculators in the yen, euro, sterling, Swiss franc and Canadian and Australian dollars.