USD stays week, could recover in the longer run – UOB

Researchers at UOB Group assessed the price action around the buck and gave their views on a longer term perspective based on futures positioning.

Key Quotes

“After the heavy sell-off across January, the USD has made a mini-rebound over the past two weeks, driven mainly by a further climb in US yield. We look at positioning data implied from CFTC futures for clues as to whether the USD was oversold against key major currencies”.

“After the strong USD euphoria at the start of 2017 dissipated, net long DXY positioning as implied by CFTC futures was unwound completely across the first half of 2017 and since the middle of 2017 positioning has been marginally short. This liquidation of net long positioning is in line with the broader sell-off in the DXY across last year from 103 to 92”.

“While the current marginal short positioning offers little information content, it is worth noting that from a decade long perspective, DXY positioning does not extend too much into shorts for extended period of time and tends to revert into net long positioning after half a year. The recent further rise in US yield may well help encourage some rebuilding of long DXY positioning”.