TechnoMeter

Institutions are known as smart money, but they often get caught crowded into popular trades that are quick to reverse. One of those is the play of selling the US Dollar. Per Bank of America Merrill Lynch, the short US Dollar trade is the second most crowded trade second to bullish US equities and the most crowded FX trade.



The short-term outlook has seen focus turned to the concerns of the US fiscal expansion late into an economic cycle and the view that other major central banks normalization anticipation will drive up their currencies, and keep global capital flows as limiting USD upside.

A recent FX forum in Miami, TradeTech FX, had bank strategists calling for extensive US Dollar weakness with calls of 1.35-1.43 EUR/USD by year end, which would likely see DXY sub-80 to 78.78, which is the 76.4% retracement of the 2008-20017 range in DXY.

more...