Earlier this morning, we discussed the concept of oversold, specifically looking at bonds. Let’s now review the same concept, as applied to currency — specifically, the U.S. greenback, via this chart from Mike Panzner.
With sentiment towards the dollar almost universally bearish, is it any wonder that the market appears to be setting up for a major rally in the greenback? Some fundamental factors that might be behind the move:
— the prospect that U.S. interest rates are poised to rise (further), rather than decrease as some had been expecting up until only recently
— "safe haven" buying of the greenback on the view that market conditions (e.g., volatility) and geopolitical developments are becoming increasingly unsettled
— profit-taking by U.S. investors in foreign securities, who’ve garnered substantial gains in recent months, with the procedes being repatriated to the U.S.
— indications sizeable short positions in the U.S. dollar
— chart-related buying
What does this mean? Well, let’s have a look at a chart:
Nice work Mike — thanks!