J.P.Morgan: Positioning Starts Off The Year In Short Territory

Late on Monday J.P.Morgan noted that their options- and futures-based positioning metrics both “indicate that USD net positioning has slumped from modest net length in early November to a moderate net short position now.”

• The pace of change in their USD positioning metrics over the last six weeks is deemed “significant, registering between -1.5 and -2.0 sigma over that window, though it’s worth noting that the pace of USD selling didn’t obviously accelerate following the December FOMC decision (potentially a consequence of year-end positioning management - evidence of risk reduction in recent weeks as well.).”
• On net they believe “this leaves USD net positioning risk fairly balanced; the two metrics both point to USD net length around -0.5 to -0.6-standard deviations below five-year averages.”
• “On one hand, there is room to extend shorts should rates pricing get more aggressive and global growth prospects improve from here. On the other, there is arguably slight positioning risk now should US growth and/or inflation begin to once again surprise to the upside given current rates pricing, especially given the extent of recent tactical positioning momentum of the last six weeks.”