Nomura is closing today several of its long USD trades, to protect profits, noticing that the that volatility we are seeing today is different than the type they had assumed.
“At this point, regardless of the very long-term outlook for the dollar, we are very reluctant to extrapolate further USD gains linearly into Q4,” Nomura argues.
“Moreover, the recent trend of pronounced risk reduction creates an increased probability of position unwinding in dollar space. This is an additional tactical headwind as dollar longs reached all-time highs on some metrics last week,” Nomura adds.
Among the trades Nomura closing today is a long-standing ‘dollar acceleration basket’, which was initiated on 30 July 2014. The basket comprised USD longs vs AUD, CAD, CHF, EUR, JPY and CLP. This trade is up 4.1% since initiation.
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