Whenever everyone is on one side of a trade, you can be sure a sharp reversal is only a matter of time.
Traders entered today with near record short bets against the US dollar:
CFTC Commitment of Traders data shows that speculators remain heavily net-short the US Dollar against the Euro, British Pound, Canadian Dollar, Swiss Franc, and Australian Dollar.
The anti-dollar herd sure took a beating today, as the buck turned in a vintage 2008 performance on a day where deflation again ruled the markets:
The dollar turns on a dime. (Source: StockCharts.com)
As most other markets get slaughtered…there’s not a lot of green on this screen. (Source: Barchart.com)
Is the “dollar up, everything else down” trade back on? One day does not make a trend – but it is possible that today marked a significant key change for the financial markets, which had been humming the same tune for exactly two years as of yesterday’s close.
And despite widespread reports of the dollar’s demise, they’ve been thus far exaggerated, as you can see from the three-year chart:
Don’t listen to the dire warnings – yet – the dollar’s trend is UP! (Source: StockCharts.com)
More on why we’re bullish on the dollar: A Contrarian Case for the Buck.