2016 was a roller coast for markets. A year ago investors were in panic about deflation, indeed as the year progressed a good case inflation scenario unfolded. The market reaction following the US elections was even faster that expected.
In real terms the USD is ~8% above its 20y average but still 8% below its high in 2002. Hedge funds are long the USD, real money remains short which is a relatively similar positioning in the last 12 months. Rate momentum has been especially negative for EUR. Meanwhile USD remains an asset with strong equities and the steepest rates trend, capturing the most hawkish monetary policy in G10.
I remain bullish on the USD for the years ahead, there are short term risks such as the BoJ's credibility in easing monetary policy vs. the ECB. Alongside the contributions fiscal policy will play this year as a potential leader over monetary policy.
hi! thanks for sharing. i would add that problems in EU are giving downside to EUR and this translates into USD strengthening. Ie. there are other countries like France, which are in talks of referendum regarding EU, Germany election coming, migrant crises etc. so fundamentally seems good case to go long USD.
mrforex89
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I expected dxy to go to 110-112 then pull back down.
arker
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Yeah this is a nice looking chart with that backtest..118 price target