On September 30, 2018 I published
a short piece on the US dollar. The conclusion was as follows:
…if something cannot go up pushed by hordes of optimists, it is
supposed to go down. Summarizing – I am bearish on the US dollar in the medium
term”
After nearly one month the
situation has not changed too much. Over that period:
- The bears (big speculators betting on a weaker US dollar) increased their bets by 1.5 thousand contracts
- The bulls (big speculators betting on a stronger US dollar) added 2.4 thousand contracts to their bullish bets
- As a result, the total balance was positive for the bulls – a net long position held by big speculators in US dollar index futures has risen by 0.9 thousand contracts
As a result, the average
speculator trading US dollar index futures is overly optimistic about the US
currency but the problem is that this huge optimism has only marginal impact on
the greenback itself – since September 30, 2018 the US dollar has strengthened
by a mere 0.7%. I am not surprised – if everybody is in one camp, most probably
the opposite happens.
What is more, over that period
the gold has strengthened as well (by 2.7%) so we have quite an interesting
situation where the gold (red arrow) and the US dollar (green arrow) are going
in the same direction:
Source: Stockcharts.com
It has to be also noted that the excessive optimism among the
speculators trading US dollar index futures is accompanied by extreme pessimism
among their fellows trading gold futures. As a result, there is an
extremely positive mix of sentiment, supporting a bullish thesis on gold and
the precious metals market.
