Saturday, February 20, 2016

U.S. Dollar - Ahead Of A Major Drop

It looks like the U.S. dollar is poised to a big correction. First of all, less and less players take part in the current price action:

Normally, when the price of any instrument is in a strong trend the open interest follows it (or vice versa - rising open interest magnifies the trend). The chart above demonstrates that the current upward trend is not supported by open interest, which is not a bullish development.

What is more, speculators are leaving the U.S. dollar long-play but do not initiate new short positions:

As the chart shows, speculators do not want to short the U.S. dollar. They are simply leaving this instrument (decreasing open interest) without building new short positions. That is why the U.S. dollar is still going up - there is no organized action against it. However, the current upward trend is weakening - please, look at the chart below:

The chart is another picture showing limited interest in taking part in the U.S. dollar long-play - speculators still hold net long position but their involvement is much lower than it was a year ago (net long position went down from 81 thousand contract in March 2015 to 31 thousand contracts last week).

Summing up - although the U.S. dollar is still in its upward trend, less and less facts support it. It is not a bullish case for this currency...but it is a bullish case for gold.

No comments:

Post a Comment