Dollar Pessimists, Gold's Indecision And Market Complacency

London (Aug 4)  Let us put things into context first. The global reserve currency has shot straight up since the 2011 lows. Furthermore, despite several short pullbacks, the broad Trade Weighted Dollar Index has traded above its 52-week moving average almost consistently for the last six years. It never really corrected properly. It was overdue for a more meaningful correction at some point.

It's true. The classic Dollar Index has fallen dramatically year to date. It finds itself right on the technical support, as seen in the chart above. At the same time, hedge funds and other speculators have turned net short.

Various sentiment surveys have also become rather negative. The Daily Sentiment Index recently dropped below 10% bulls while SentimenTrader's Dollar Optix dropped below 30% for the first time since March 2014.

Nevertheless, looking at fund positioning in the chart above, one could argue that funds could turn even more bearish on the dollar. While this is true, I would like to add some additional data here.

While the market is generally shorting the US dollar, the important point is that hedge funds and other speculators have turned bearish on the Japanese yen.

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