USD: We may have just seen THE TURN in the dollar. With the dramatic technical breaks and very impressive price action, this has been a most excited news for USD in some time. So The list of dollar-positives is very long:
- US rates ripping
- Commodity bubble deflating
- Financials rally on bad news
- Unprecedented USD-positive M&A pipeline
- EUR-CEE4 turning
- Light at the end of the tunnel in Iraq
- Modified U.S. policy on Iran
- New president elected in four months.
List of long a USD basket: USD/JPY, EUR/USD, AUD/USD, USD/CAD, USD/BRL and USD/MXN; along with USD/BRL and USD/MXN. Much of the Brazilian macro story is predicated on commodities and the recent turn in the CRB suggests USD/BRL could rally significantly. Long commodities and short USD/BRL would be a common pair of positions in a macro fund so if the commodity deflation accelerates, funds will be forced to cover USD/BRL shorts to cover losses.
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