One of the points that we have emphasized to clients in our most recent reports has been the risk of a reversal in the USD. Fundamentally, the USD looks better than most, but nothing goes up in a straight line and speculators have been complacently long. With the comments yesterday by Bernanke that the Fed sees accommodative monetary policy as the correct policy stance for as far as the eye can see, the market may now be back in a world where the USD goes down and all other assets go up. This would pose a problem for many speculative positions sitting long in USD.

We note however that USD net longs versus the G4 have declined somewhat in recent weeks.

110713_spec 1However, it is interesting to note that speculators have continued to add to their net longs versus high beta currencies.

110713_spec 2Overall, speculators are still substantially net long the USD and this adds short term risk to  the most crowded long USD positions e.g.  in AUDUSD, gold and silver.