Australian dollar bears gather

Forex was stable Friday night as the week’s fireworks subsided and risk rallied hard. DXY was up and EUR down:

The Australian dollar dead cat faded:

Gold fell, oil firmed:

Metals were firm:

Miners lifted:

EM stocks not so happy:

Junk fine:

Curve squashed again:

Which drive FAAMGS mad:

Not much data to report from Friday so let’s take a look at currency positioning. AUD continues to sink to new positioning lows at -36k contacts, the shortest the market has been since late last year:

On the other side of the cross, the USD is gaining more fans and contracts swung net positive for the first time since COVID struck:

That said, there is plenty more room for upside in USD and DXY, via JPM:

Last week we noted thatmomentum signals were largely neutral for the dollarvs. DMcurrencies.Figure13shows the average ofour shorter-and longer-term positions for the dollarvs. DM cyclical (EUR, GBP, AUD, CAD) and DMdefensive (JPY and CHF) currencies. It suggests thatthe past week has seen CTAs adding dollar positionsvs. both cyclical and defensive currencies. But whilethe ongoing dollar strength has seen a shift towardsdollar-bullish positions among momentum-basedinvestors, these bullishpositions are still relativelymodest in size. In other words, there is some way togo before dollar positions of momentum-basedinvestors approach extreme levels.

So, I remain of the view that unless or until markets puke over a growth scare and force the Fed to pile in with more “put”, DXY will keep on the up and AUD on the down.