The US dollar strengthened following a robust Non-Farm Payrolls (NFP) report, putting pressure on major currencies despite already crowded bearish positions. Euro net-shorts reached an 11-year extreme, with record gross shorts on EUR/USD and AUD/USD yet to trigger a sustained squeeze. Sterling bulls were caught off guard by a sharp reversal despite the Bank of England's hawkish rate hike.
Large speculator net-shorts on the euro hit their highest level since December 2015, while net-long exposure among asset managers dropped to its lowest since October 2019. The US dollar index (DXY) regained control, with net-long exposure above $35 billion. EUR/USD bears are eyeing a break of the May 2025 low at 1.1074, though short-squeeze risks remain.
Sterling saw a sharp reversal despite the BoE's hawkish stance, with rising volume suggesting long liquidation. The Canadian dollar reversed lower despite recent increases in gross longs, while the Australian dollar closed below 69c after a less hawkish RBA. Commodity currencies faced pressure due to a risk-off tone and stronger US dollar.
Asset managers who had turned net-long on the Canadian dollar after the Bank of Canada's hawkish hike may have reverted to net-short exposure. The Reserve Bank of New Zealand's surprise hold on October 28 saw NZD/USD futures traders correctly positioned, with the currency falling to the January 2025 level.