Taking a shot at short USD

USD

Most signs point to a lower dollar, though many of the catalysts are well-known. Hassett is increasingly expected as the new Fed Chair. Hassett in orange, spiking as Timaraos and other sources appear to confirm he’s the man.

The FOMC is expected to cut rates at the December meeting while the BOJ is expected to hike…

This has interest rate differentials at the wides against the EUR and JPY…

Seasonality tends to be bearish USD in December. And you are about to get a 2026 fiscal surge in both Germany and the USA, with the USA running it hot from a very weak fiscal starting point, and Germany attempting to do the same from a strong fiscal base.

You would think that such a setup would mean that the market is super bearish USD and short dollars across the board, but the ongoing malaise and low-vol environment in FX has scared away speculators and left the market with a small long USD position as CTAs follow price momentum and macro peeps watch from the sidelines.

Could it be as simple as: Go short USD here?

Looking across the matrix of G10 possibilities, USDJPY does not look good to me because this setup reminds me too much of December 2024 when the BOJ was nearly priced for a hike, they passed, and USDJPY exploded higher. The oldest trick in the book if you are a central bank that wants to hike, but wants to minimize the impact of that hike, is to wait for the hike to get priced, pass, then hike the meeting after. The RBA have done this a few times, as have other central banks, and it gets the market set up for the hike with enough chop and nonsense beforehand that when the hike finally lands, it’s a nothingburger. The BOJ hike in January 2025 barely left a footprint.

EURUSD looks fine for a long. The rate differentials do suggest a modestly higher EUR vs. the dollar, though rate differentials have been hard to trade in H2 2025. I also like NZDUSD as we have just ended a prolonged rate cutting cycle from the RBNZ and the market still has legacy NZD shorts. AUDUSD is probably fine too, with metals in demand, and stocks trading perfectly okay despite some extended angst over the AI Capex cycle and valuations.

I don’t like GBPUSD because the BoE is in a cutting cycle and the budget could have a negative impact on growth. Sweden is a pass because the seasonal PPM flows begin soon (I will write about that towards the end of this week or maybe this Monday). Short USDCAD is also fine, but having whiffed above 1.41, I find it hard to hit a bid down here.

So the thesis is pretty simple: The market is long dollars with a run it hot Fed Chair coming, an already bad fiscal situation, high nominal rates that are about to fall, a seasonal tendency for USD weakness, and interest rate differentials at the wides. I am going long EURUSD and NZDUSD. Stop loss 1.1519 in EURUSD and 0.5644 in NZDUSD. Targets TBD; let’s see if we can get a bit of momentum first.

The EURUSD chart is a bit of a mess, but we’re above the 100-hour MAs, we’ve broken the narrowing wedge (red lines) and the big resistance is at 1.1650 (double top, purple line).

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Final Thoughts

1. Lord Fed bullish equities piece.

2. MSTR rejection of FUD on massive volumes. Purple bars show volume. Above $180 invalidates the move lower and would be the first trading above the 100-hour MAs since MSTR traded at $293 in late October.

Have a senior day.

1997: the President of the United States was born in 1946.

2007: the President of the United States was born in 1946.

2017: the President of the United States was born in 1946.

2027: the President of the United States was born in 1946.

HT @stats_feed

good luck ⇅ be nimble