Retail Crowds Remain Long US Dollar - Time to Sell?
Retail FX crowds remain long the US Dollar (ticker: USDOLLAR) against the Euro, and going against the crowd means buying into EURUSD strength. Yet exceedingly quiet conditions ahead of a highly-anticipated Fed address in Jackson Hole warns against taking aggressive trades.
Crowds continue buying the US Dollar against the Euro, British Pound, Japanese Yen, Swiss Franc, and Canadian Dollar—normally a crystal-clear signal for us to favor further USD weakness. Yet it’s critical to note that retail traders tend to do well in times of exceedingly low market volatility, and indeed our retail sentiment-based trading strategies have mostly underperformed with FX volatility near five-year lows.
It remains critical to watch for any and all surprises in Fed Chairman Ben Bernanke’s address at the Jackson Hole Economic Policy Symposium and its implications for the US Dollar. Yet we’ll need to see a jump in volatility expectations before going against the crowd and selling into USD weakness.
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--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com
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