Long USD Trade Remains Moderately Crowded Despite USD Breaking Above Covid Highs
May-03 23:45By: Yvan Berthoux
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- Net long specs on the US Dollar ticked slightly higher in the week ended April 26, increasing by 8.2K to a total of 80K contracts.
- Momentum on the dollar has been mainly driven by the renewed geopolitical tensions (EU preparing for new sanctions against Russia including oil&gas) and the ‘hawkish’ Fed tone.
- St. Louis President Bullard mentioned recently that a potential 75bps hike cannot be ruled out given the current level of inflation.
- Interestingly, the ‘Long USD Trade’ is moderately crowded despite the DXY index breaking above the Covid highs last week.
- DXY found resistance at the psychological level 104 last week before consolidating slightly lower in recent days; a break above that level would open the door for a move up to 107.31 (December 2012 highs).
- The Fed is meeting this week and is likely to accelerate the pace of its tightening cycle by lifting its policy rate by 50bps.
- With the FFZ2 futures contract currently trading at 97.27, the market is pricing in a FFR at 2.75% by the end of the year.
Source: Bloomberg/CFTC/MNI.
