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6 Jan 2015
USD correction seems likely very soon – SG
FXStreet (Barcelona) - Kit Juckes of Societe Generale feels that USD might see a correction very soon, with the CFTC data pointing that long USD positions are near decade-long highs.
Key Quotes
“The dollar made a new post-2005 high yesterday, but a correction seems likely very soon (if it isn't already starting).”
“The December 30 CFTC data concern me for two reasons, despite the usual caveat that they only tell me about a small part of the market and are almost a week out of date. Firstly, the sum of the dollar long positions on the IMM is not only holding at decade-long highs, but it is as big as the largest net short - when the dollar was about to turn higher in 2011.So we're starting 2015 with a consensus that the dollar will rise, outsized long dollar positions, and we have just seen a 15% appreciation in 8 months.”
“We're here because the ECB will ease further, because of the danger of Greece leaving the Euro Area and because the Fed will raise rates this year. Of these three factors, the last is the most critical. If ECB QE doesn't send rates lower and if it actually supports European assets (equities, peripheral bonds), then it will be less Euro-negative than the shift to negative deposit rates last year.”
“‘Grexit' would be very bad for the Euro, but only if it were contagious across European markets.”
“The de-coupling of EUR/USD from European equities and peripheral bond spreads suggests that the Euro has reacted more./earlier to the negative news in European other markets need to catch-up.”
“The CFTC FX data are no more extreme than the US 10-year Note futures positioning which shows net shorts increasing again last week.”
“I would rather buy dollars into a rising US yield environment, after a position ‘flush' and supported by a still-hawkish FOMC at the end of January, than wade in with the crowd here, thanks.”
Key Quotes
“The dollar made a new post-2005 high yesterday, but a correction seems likely very soon (if it isn't already starting).”
“The December 30 CFTC data concern me for two reasons, despite the usual caveat that they only tell me about a small part of the market and are almost a week out of date. Firstly, the sum of the dollar long positions on the IMM is not only holding at decade-long highs, but it is as big as the largest net short - when the dollar was about to turn higher in 2011.So we're starting 2015 with a consensus that the dollar will rise, outsized long dollar positions, and we have just seen a 15% appreciation in 8 months.”
“We're here because the ECB will ease further, because of the danger of Greece leaving the Euro Area and because the Fed will raise rates this year. Of these three factors, the last is the most critical. If ECB QE doesn't send rates lower and if it actually supports European assets (equities, peripheral bonds), then it will be less Euro-negative than the shift to negative deposit rates last year.”
“‘Grexit' would be very bad for the Euro, but only if it were contagious across European markets.”
“The de-coupling of EUR/USD from European equities and peripheral bond spreads suggests that the Euro has reacted more./earlier to the negative news in European other markets need to catch-up.”
“The CFTC FX data are no more extreme than the US 10-year Note futures positioning which shows net shorts increasing again last week.”
“I would rather buy dollars into a rising US yield environment, after a position ‘flush' and supported by a still-hawkish FOMC at the end of January, than wade in with the crowd here, thanks.”