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Markets have been happy to sell the dollar recently on the narrative that the US is seeing slowing economic data, inflation is falling, and the prospect of federal reserve interest rate cuts is growing ever closer. This dollar weakness is expected to continue as long as the Federal Reserve doesn’t signal any more rate hikes. Furthermore, the recent dollar weakness is the unwinding of some very stretched dollar long positions.As investors consider the path of US rates we may very well see an acceleration/continuation of dollar selling and a further unwinding of stretched dollar long positions. This will also be on keeping with the seasonal weakness in the USD we see around year end. With the dollar falling over 60% of the time from November 28 to December 31st, and an average return of nearly 1% in falls, now is the time to watch for decent opportunities to sell dollar rallies.The main risk here is obvious the incoming inflation data and GDP data for the US remains strong and we start to see Bond buyers retreat, then we could see a continuation of dollar strength. So all eyes are on the Fed and the incoming US data for this outlook, but keep in mind the strong seasonal bias to sell the dollar.The major trade risk here is from a return to rate hikes from the Fed which would support the USD. Also, strong worries about a US recession could also send the USD higher. Video Length: 00:02:11More By This Author:
Dollar Bears Poised To Pounce In December?
