If you’re out there looking for contrarian indicators, it’s probably worth noting that investors flipped short USD for the first time in a year according to the latest positioning data.
As Deutsche Bank notes, “sentiment worsened in USD as leveraged funds cut their long USD positioning by more than half while asset managers extended their shorts by a quarter.”
That’s largely the product of decreasing policy divergence between the US and Europe (or at least the perception/anticipation of decreasing policy divergence) and concerns about the viability of the Trump agenda.
With that as the backdrop, today’s pre-holiday price action is pretty amusing as the dollar is up a second day and climbed to a fresh high for the session after a stronger-than-expected ISM print.
At this point, there’s probably a yield differentials argument for asserting that the euro has overshot…