No Positive Sentiment For The Dollar -- Which Means It Could Turn Up

by: Roger Nusbaum

Roger Nusbaum submits: This chart of the dollar captures the trend of the last couple of weeks very well. As I read the action it appears as though the dollar has no where to go but down. Ahem.

If you have been lucky enough to have a lot of foreign exposure this year you have probably added a lot of alpha to your portfolio. It is possible any outperformance has accelerated in the last two weeks.

The dollar can't go in only one direction. I generally expect a weaker dollar, but it makes sense to think it has to correct a little bit before anything else.

I am writing this just as the Fed is due to announce a move to 5%. As seems to always be the case, the market is waiting on pins and needles for Maria to decipher what their statement will mean.

Some sort of dollar rally would not come as a shock even if it does not last a long time. Another factor that could turn the tide, short-term, is that anecdotally there seems to be no positive sentiment on the dollar anywhere. In the past I have noticed everyone ganging up on the same side of the trade and it usually turns the other way shortly thereafter.

This post is not meant to urge anyone to undo any themes they believe in but to create some expectation that some things that have been working very well for the last couple of months may have a bumpy few weeks.