There could be a strong correction in the dollar soon

Though I am bullish longer-term on the dollar, as you can see here, I think we could actually see a strong drop in the near term.

Take a look at the Commitment of Traders for the dollar index above. Notice that commercial traders have rapidly grown a huge net short position as the dollar has rallied. If you look back to the previous time there was a similar net short position, there was a large 5-pt drop in a short period.

1 comment:

Dave Narby said...

Maybe. The commercial traders are probably betting the Fed will debase the dollar to keep equities pumped.

But... Timmah needs to sell some bonds and there's a problem: foreigners don't want our debt, and there's a dollar shortage.

When push comes to shove, they will crash the equity market to get save the bond market, and if the commercial traders read this wrong... Sayonara, suckas!