The DXY index has fallen in a straight line this year, with the Sharpe ratio of the YTD move at
almost 2.4. Although we have been bearish on the dollar from a macro point of view since
last year, the dollar does look vulnerable at present to a short squeeze.

The top chart shows that the DXY index is very far below its 200-day moving average at
present, while the bottom two charts show that CoT speculative futures positioning is now
as short as it was back in 2014. Speculators are particularly short the US dollar against
EM currencies. We advocate keeping a neutral position on the US dollar in anticipation of
shorting again into a counter-trend rally as the extreme price action and positioning cause a

(Click on image to enlarge.)

Charts showing DXY index deviation and net CoT dollar positioning

Source: Bloomberg, Macrobond and Variant Perception