The dollar bulls are looking increasingly like a cult

Bloomberg/Jared Dillian/7-19-2022

“Naturally, betting on gains in the greenback has acquired a huge following, even among retail investors, gaining a cult-like status almost equal to the self-described ‘apes’ that cheerlead for meme stock AMC Entertainment Holdings Inc.”

USAGOLD note:  So is the dollar in a mania? Dillian sees signs that it might be and worries that there will come a time when it falls out of favor. “That is what inevitably happens when sentiment gets extremely hot,” he says, “and it may be happening now.” With that in mind, one must also take into account the extraordinary leverage at work in the currency markets. The Office of Comptroller of the Currency reports notional derivative exposure in FX trading at $43.6 trillion – second only to interest rate derivatives. In other words, though it might seem far-fetched at this juncture, there is potential for a downside just as fearsome as the upside.