TD Research discusses the latest moves in G10FX and thinks that positioning has been the major driver behind such moves.
"The merry-go-round of cheers and fears persists, reflecting the headline pingpong of the trade wars. Markets have been fixated on the scope for the early revival of the reflation trade to shift into overdrive. That needs the help of policymakers to agree and deliver on no further escalation of the trade wars tariff reversal is an added boost," TD notes.
While there are some pockets of value across FX-land, we do think the bulk of the recent shift reflects positioning. Our positioning indicators have gone to modest shorts from extreme longs in JPY and CHF. The USD's positioning is back to neutral across the majors. The stop-and-go reflation theme could limit the breakout potential in USDJPY, leaving us to prefer our MRSI basket laid out yesterday," TD adds.