SB Trade Desk: Analyzing USD Sentiment

7/9/2018: SB Trade Desk: Analyzing USD Sentiment

SB trades markets (including USD pairs) from a technical standpoint but that doesn’t mean we don’t read news.  In fact, SB scans newspapers and financial headlines all the time!  The difference between most participants and us is how we interpret news.  There are key words and even font sizes to look for when assessing whether or not a headline indicates a sentiment extreme and therefore an opportunity to fade the crowd.  As an example of how SB analyzes news headlines to assess sentiment, the following is from the 7/2 SB Swing Update.

 

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SB Swing Update: 7/2/2018

It took nearly 6 months of the USD rallying for the WSJ to notice USD strength.  Now that they’ve noticed, the USD rally is probably over.  The following quotes are some highlights (text in parentheses is mine).  The belief in continued USD upside is as unanimous as I’ve seen since early 2017.  The only counterpoint to the USD bullish theme is found in the last paragraph (last quote below).

“Many observers think the rally looks poised to continue as markets head into the second half of the year.”

“Hedge funds and other short-term investors in June turned bullish on the dollar for the first time in a year, according to data from the CFTC.” (the USD topped in June 2017!)

“Investors also are turning skittish on assets that could suffer under a strong dollar, including gold and other raw materials.”

“I don’t understand how anyone sits back and imagines a story where the dollar goes down…”

“Net bullish bets on gold stand at their lowest level since January 2016…” (gold soared beginning mid-January 2016! remember that I’m looking for a gold low near 1236)

“Investors are becoming more assured in these bets because many think the factors boosting the dollar are likely to remain in force.”

“Not everyone is counting on the dollar rally continuing.  Aaron Hurd said he is looking to lighten up on dollar bets in the second half of the year.” (this is the only point that is not USD bullish but it’s probably more neutral than bearish)