Sharp rallies in the US Dollar have been met with aggressive crowd selling, giving us contrarian signal to buy into US Dollar strength. Traders have likewise sold the resurgent Japanese Yen; GBPJPY long positions have jumped 57% overnight and give us a strongly bearish contrarian bias. Similarly sharp declines in the S&P 500 leave short-term momentum plainly in favor of the safe-haven US Dollar and Japanese Yen, but it will be critical to watch whether markets return to their recently choppy trading ranges. The SSI tends to underperform in rangebound markets, and the clear risk is that volatility slows and the USD and JPY pull back through short-term trading.
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