Notes From the Rabbit Hole

NFTRH 457 Excerpt; Currencies

After reading the Macro Tourist and finding out I am not the only guy on the planet short the Euro I got the idea to reproduce NFTRH’s Currency segment publicly. Contrarian views using public sentiment and Commitments of Traders have been great for calling the Treasury bond market over the last year but so far in expecting the USD to bottom, firm and bounce… no dice. Not yet. My support target for Uncle Buck has been ‘mid-90s’ and he’s really testing my patience. It’s okay though; I’ve got plenty of that.

Currencies (NFTRH 457, dated 7.23.17)

Hi, my name is Gary and I am the only person on the planet bullish the US dollar and bearish the Euro. Or so it feels.

Indeed, [on a weekly view] support is under dire threat vs. Euro, Canada and Aussie dollars and even the British Pound [which I am long]; even as USD index holds a thin sheet of tin foil masquerading as long-term lateral support.

But then, there is sentiment and Commitments of Traders. The public hates itself some USD, just as it did in the big inflationary blow off of 2010/2011 and in 2013. In 2013 it took some time after the worst of the contrarian signal for Uncle Buck to turn up but when he did, we caught him at it and prepared for a bearish phase in the stock market, which eventually came about in 2015.

If nothing else, this shows how you can be right but then need all kinds of patience and perspective within that rightness. It is hard work to do when looking too intently at markets on a daily or even weekly basis. It is why I am trying to discipline myself to follow the analysis, at least in mind if not daily/weekly practice, rather than the markets’ every twitch, in-week. Here is the view of over-optimistic public sentiment. Graphs from Sentimentrader (my mark-up on graph 1)…

Commercial Hedgers are nearing flat in their positioning after having been 100k short.

Meanwhile, the Euro has the opposite side of that trade with public sentiment getting over bullish.

Commercial Hedgers are net short to an extreme.

Is it different this time? could be. Also, will the current extremes drag on longer than even a patient player can stand? Quite possibly. But my job is to illustrate the setups that are in play so you can make your own informed decisions. USD is technically bearish and contrarian bullish and Euro is technically bullish and contrarian bearish.