US Dollar Shows the Dangers of a Crowded Trade

The US dollar was dumped on Tuesday as a quiet day turned into a big drop. The euro was the top performer while the pound and dollar lagged. Asia-Pacific trading picks up with Australian CPI and Japanese machine orders are up next.  A new Premium trade in EURUSD was added alongside 4 charts. There are 6 trades currently in progress.

A trickle of euro strength turned into a flood in a big retracement Tuesday. EUR/USD touched as high as 1.0970 from 1.0810 in Asian trade.

Ashraf revealed a new premium euro trade today.

US dollar weakness was widespread with the exception of sterling. The main trigger for the move was simply positioning. We scarcely read a research note or see a comment from someone who isn't a US dollar bull.

Treasury yields pushed lower on Tuesday while European sovereign yields rose and that started US dollar sales. A sour mood in US stocks added to the sentiment. Finally, the Fed released benchmark revisions for industrial production and they painted a picture of far more slack than believed.

Durable goods production was lowered by an average of 1.2 percentage points each year starting in 2012. The total production of the industrial sector is 2.6% lower than believed and that could give the Fed second thoughts about a September hike.

Another central bank that's thinking about rate moves is the RBA and it will have plenty to think about today with skilled vacancies at 0100 GMT and, more importantly, Q2 CPI at 0130 GMT. The Australian core measure is the trimmed mean and it's expected up 2.1%.

The Australian dollar shrugged off dovish RBA minutes and some mild jawboning to close a half-cent higher Tuesday. A soft CPI reading would spark renewed selling and speculation about an RBA cut before November.

Any confusion might not be long-lasting with RBA Gov Stevens slated to speak at 0305 GMT