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FXstreet.com (Barcelona) - As is often the case in recent months, positioning is the first place to look for answers and insights. "We have noted of late that the USD/JPY and the EUR/CHF upside have clearly been helped by relatively clean positioning. Even as of the end of last week, our flow monitors show that on a structural basis, the market remains long JPY and CHF (though declining rapidly for the former), with the bulk of the exigent longs held by the real money community." writes Gareth Berry, a Research Analyst at UBS.

Moreover, according to Berry, "These are very favorable conditions for a reversal - the marginal impact of unit flow in the opposite direction is magnified - and we can apply the same logic to US-based real money." For most of the last four years, we have seen flow directions have an inverse relationship with the performance of the dollar. In addition, there have been only four occasions post-crisis where the market was net short foreign equities, and in each occasion a sizeable move lower in DXY followed the unwind.

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