The US dollar is a currency that has been steadily rising since 2018. On the one hand, the Fed's interest rate hikes and, on the other, a return to a safe dollar in the face of the economic slowdown and recession, seemed to cause increased demand for USD.
The US dollar is a currency that has been steadily rising since 2018. On the one hand, the Fed's interest rate hikes and, on the other, a return to a safe dollar in the face of the economic slowdown and recession, seemed to cause increased demand for USD.
The US dollar index futures contract has gained over 12 percent in less than two years. As a result, the dollar has become the strongest since 2017, which in turn did not like Donald Trump, because in his opinion the other central banks did everything to weaken their currencies in order to increase the competitiveness of the economies on the international arena, only not the US and Fed.
Nevertheless, the global economic slowdown and symptoms of the slowdown have also somewhat in the US industry forced the Federal Reserve to cut interest rates, as stated, just in case. And so in the US, the federal fund rate range has been reduced three times this year, by a total of 75 basis points. however, despite interest rate cuts, the US currency did not weaken significantly – maybe it is only a matter of time.
Investors on the USD index futures contract, despite its recent rebound, reduced long positions to the lowest level since July. The scale of reduction seems to be significant, as long positions fell from 52,000 contracts at the beginning of October to 34,000 in mid-November – according to CFTC commission data and the COT report.
USD index and net long positions. Source: tradingster.com
You can try to draw the following conclusion from this – the US dollar seems to be a very overbought currency. This means that whoever already had a dollar to buy, bought it and now at a still high price could sell it, making potential profits. Thus, investors holding USD earlier may no longer believe in the continuation of the two-year trend.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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