US Dollar Enters Bearish Regime Amid Weaker Data
The US dollar has entered a bearish regime, according to TD Securities strategists. This change in sentiment follows the Treasury buyback announcement on August 19, which pushed the US Dollar Index (DXY) below its 200-day Simple Moving Average.
The strategists highlight several factors that contribute to this downtrend. Weaker US data releases have been a significant concern, with recent numbers unwinding all the upside surprises from Q2. In addition, near-term Federal Reserve rate hike expectations are being priced out, further pressuring the dollar.
Financial repression and rising institutional credibility risks also play a role in the bearish momentum of the US dollar. The strategists note that USD positioning has flipped from long to short, indicating that investors are chasing the dollar lower. This is supported by front-end risk reversals broadly flipping toward USD puts vs G10 currencies.