MUFG Research discusses the latest IMM report, and highlights that specs have turned back into net shorts on EUR/USD.

"Positioning data released on Friday did however suggest that levels in key G10 crosses may now be drawing in Leveraged Funds interested in buying the US dollar. As we have highlighted here recently, there is a strong seasonal bias favouring EUR/USD higher in December which could partly reflect positioning adjustment as year-end approaches. In general, over the last 10yrs, EUR sentiment has been negative and in over 70% of that time, Leveraged Funds were net short EUR," MUFG notes.

"But positioning data this year suggests that process of adjustment may have taken place already. From the week ending at the end of September, Leveraged Funds went from a short EUR position of nearly 27k contracts to a EUR long position of 6.5k in the week to 22nd November – a near-34k contract swing – the biggest swing favouring EUR since early April before EUR sentiment turned extremely negative. But the surge in EUR/USD to the 1.0500-level and above has seen that EUR/USD buying fade with shorts now being re-built. The market has turned back to net short (near -11k) to the biggest total since mid-October when EUR/USD was well below parity," MUFG adds.