The squeeze is on: 3 reasons why the US dollar is taking a battering
US dollar bulls are finally taking a break.
There’s no single clear catalyst for USD selling today but in many ways, it’s overdue.
- USD positions are extremely crowded
- The rise in EUR/USD above 1.1368 has sparked a broader run on the US dollar. We offered two other reasons for EUR/USD strength earlier today.
- What’s the catalyst? The RBA cut was the final central bank to make a dovish move. All the pro-USD good news is out there, so that may have been the cue for a turnaround
Even after a somewhat surprising rate cut, the Australian dollar has now recovered the great majority of its losses.
One reason for suspicion
What’s especially interesting is that stocks are rallying and Treasury yields are moving higher. Inflows into the US assets are inevitably USD bullish — higher Treasury yields are attractive and roaring stocks pull-in momentum chasers. It’s too early to declare the death of the USD rally; it’s had hiccups before and found a way to rally.
If non-farm payrolls on Friday are strong, the Fed will continue to talk about rate hikes and that’s would make the dollar bullet proof.
More on the squeeze here: