Intraday Market Thoughts

Have USD Shorts Really Bottomed?

by Ashraf Laidi
May 8, 2011 17:15

These charts could seem like the perfect set up for USD upside. It was about a month ago (week ending Mar 18) that USD net shorts bottomed at a 3 year low. Six weeks later, USDX hit a 3-year low thanks partly to a 500-pip decline in EURUSD. We've already argued the case against any considerable USD rebound on here. http://ashraflaidi.com/t/?hc2354

Fake rebounds in USD (shown in blue squares) have emerged fairly quickly a few weeks after 2-3% recoveries. The extended decline in USD shorts and subsequent increase in net shorts since 2010 reflects the evident comfort with speculators' shorting of the USD and more importantly, the reality that USD net longs become overcrowded fairly quickly. Could this time be different that USD net shorts have emerged from the most in 3 years? The Greece story must be followed closely, but Fed dovishness isn't going anytime soon. Stay tuned in our Daily Premium "Intermarket Insights" for directional calls.

 
 

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