King Dollar Positions

That 5% drop in China last week, and the EuroUSD hiccup on Thursday, is still working its way through the system with a lot of positions yet to be unwound.  This week, beware of Wacky Wednesday. Aka downside swings on trading days bordering the Wend before options expiration which seems to always involve many unwinds. That would be Dec 9th, this Wend.

Around 11/18 many said the long dollar trade was crowded.

"Large speculators increased bets that benefit from greenback appreciation by a net 92,293 contracts in the week through Nov. 17, data from the Commodity Futures Trading Commission."

Earlier this year both Barclays and GS projected EURUSD at 0.95 within 12 months.

"We forecast EURUSD to depreciate to 1.03 by year-end and trade at 0.95 by Q3 16", argues Barclays.

“Even as day-to-day and short-term risk-off correlations in the EUR persist, there should be no obstacle for renewed ECB easing to push down further on EUR/$. We expect any additional ECB easing, first by increasing the length of the sovereign bond purchase program in coming months, to help drive the EUR to 0.95 vs the USD over the next 12 months,” Goldman Sachs projects."

Yet, at the moment, less are hedging against a dollar advance.

"The premium for options protecting against an advance by the dollar versus the euro, compared with those guarding against a drop, is near the lowest since July, according to data compiled by Bloomberg. Wagers on further dollar strength versus eight of the currency’s major peers slipped to a net 417,129 contracts last week, the first decline since mid-October and down from 428,298 a week earlier, CFTC data show." – Bloomberg

The form of the destructor aka King Dollar visited 100 and last weeks DXY dip was a healthy reset for what is to come. Oil back under $40, no surprise here with more downside to come for commodities. USDU and UUP should reflect the "dollar" squeeze which may reach a crescendo sometime in Q116.  All factors still pointing to and projecting a potential bottom for commods by March 2016. TBD.

Nice to be back in the saddle again, and I prefer to see this anyday, as opposed to Aerosmith's Steven Tyler.