Hedge funds are shorting the dollar like crazy

SentimenTrader/Jason Goepfert

“There is a broad spectrum of investors looking for the dollar to rally, which should help trigger a pullback in stocks, metals, and commodities. The trouble is, many of their arguments were the same ones used in September. On the surface, the arguments have a little bit of support. The buck closed above a widely-watched moving average for the first time in months on Monday. That ended a streak of 2 months below that average, the longest in nearly a decade. This is the kind of streak the dollar consistently underwent during structural bear markets, with only the last one in the sequence (sometimes) ending up leading to sustained gains.

USASGOLD note:  Goepfert ends with a reflection borne of significant experience analyzing financial markets – “This is why we test – markets do a very good job at screwing with people who try to use logic instead of human nature.” He says that there is “no consistent evidence that this is the type of behavior [as shown in the chart below] that leads to short-covering.”

line chart showing the short position in the dollar and its potential effects

Chart courtesy of SentimenTrader.com



 Repost from 1-13-2021

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