1. The dollar’s early rebound at the start of this year is not expected to last

BI conducted a survey around April 9-16 and found that ~60% of 121 respondents did not expect the dollar recovery to last. However, BI did note that there has been a reduction in the proportion of market participants embracing USD bearishness compared to their February 02 survey which saw 80% of respondents favouring selling.

2. Dollar bears to accelerate into year-end

Only 50% of the 121 respondents expect the dollar trade-weighted index to move lower by the end of June, but 57% expect the DXY will be lower by the end of the year.

By the end of 2021 here is what the survey respondents are expecting for year-end:

  • The USD is expected to down against the sterling (65%).

  • The USD is expected to down against the euro (61%).

  • The USD is expected to down against the yen (57%).

However, only 52% expect a higher EURUSD by the end of June and 60% see a higher GBPUSD by the end of June.

3. Yuan bulls to win out

Over half of the respondents still see the yuan outperforming even in a higher US yield context.
In this situation the China-US 10 year spread may further narrow from 150 bps, but if that happens BI expect the yuan’s carry appeal via FX forwards to be a tailwind to the yuan as loans the Fed holds rates through 2023 and contain the short end yield.

fxsoriginal

4. Dollar positioning

USD bear positioning has gone from overweight to underweight, so that is better for bears than at the start of the year when their call was overcrowded and overstretched.

fxsoriginal

So what does this mean?

It means the majority USD bearish case remains. However, there is a real risk here that a faster US recovery is not being priced. The risk is that the vaccines basically do their job in 6-9 months and economies roar back on pent-up savings. The Fed then look at raising rates next year and that will shake out the USD bears. The fact that there are less bulls than in February tells that some of that scenario is, at the very least, being considered. Not one to act on now, as it is full of ifs, buts, and maybes. However, one to note.

Chart


Learn more about HYCM

High Risk Investment Warning: Contracts for Difference (‘CFDs’) are complex financial products that are traded on margin. Trading CFDs carries a high degree of risk. It is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved. Seek independent expert advice if necessary and speculate only with funds that you can afford to lose. Please think carefully whether such trading suits you, taking into consideration all the relevant circumstances as well as your personal resources. We do not recommend clients posting their entire account balance to meet margin requirements. Clients can minimise their level of exposure by requesting a change in leverage limit. For more information please refer to HYCM’s Risk Disclosure.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD: Demand for high-yielding assets likely to continue

The EUR/USD pair reached1.2171 last Friday, its highest since March 1, closing the week a few pips below such a high. Wall Street reached all-time highs, while US government bond yields plunged. EUR/USD is overbought but still has room to extend its advance.

EUR/USD News

GBP/USD: Scottish election’s result may take its toll on pound

 The British Pound took advantage of the broad dollar’s weakness, and GBP/USD  surged to 1.4005, retreating just modestly ahead of the close to settle around 1.3990. GBP/USD is technically bullish, could advance once above 1.4015 resistance.

GBP/USD News

Gold could target 200-day SMA

Gold extended its rally after surging above $1,800 on Thursday. During the first half of the week, the XAU/USD pair struggled to rise above $1,800 and fluctuated in a horizontal channel. The next target on the upside aligns at $1,850.

Gold News

Judge reaffirms order SEC must produce documents on Bitcoin, Ether and XRP in Ripple case

Ripple's victory granted the firm access to the SEC's documents on the three leading cryptocurrencies. The regulatory agency recently denied the possession of these documents.

More Dogecoin News

S&P 500 and Nasdaq: Can the Fed pump anymore after weak jobs report

Well, that was an interesting jobs report. Not too many people were forecasting that one. Just in case you missed it NFP were forecast to come in around the 1 million jobs gained but instead the US only added 266k.

Read more

Majors

Cryptocurrencies

Signatures