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USD Analysis and Talking Points

  • US Dollar Long Positioning Crowded
  • Trump Criticism of Federal Reserve

Check out the brand new Q4 FX forecast guides

US Dollar Long Positioning Crowded

Global equities are on course for its largest weekly loss in 6-months as stock investors fret over higher interest rates. However, the sell-off in equity markets has also been coupled with softness in the US Dollar, with the major beneficiary of the Dollar selling being the Japanese Yen. As it stands, USD long bets are the most bullish since December 2016 and somewhat crowded, which in turn increases the risk that the USD may face a wave of speculators liquidating positions.

Trump Criticism of Federal Reserve

Amid the sell-off in equity markets, President Trump had continued to criticise the Federal Reserve over their current tightening, the President also added that the USD is too strong, which in turn reduces the competitiveness on US exports. As such, this has tested the patience among USD bulls with the greenback remaining on the backfoot.

US Dollar Technical Overview

Following yesterday’s largest one day decline in the US Dollar since September 20th, eyes are now on the weekly close, in which a close below the 23.6% Fibonacci retracement at 94.55 may provide a cause of concern for USD bulls leading to a corrective move towards the 38.2% Fibo (93.29).

US Dollar Price Chart: Daily Time Frame (January-October 2018)

Global Equities Corrected, Will the USD Follow?

Chart by IG

--- Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX