By eFXdata — Jan 17 - 01:00 PM
Synopsis:
BofA’s latest FX and Rates Sentiment Survey highlights that positioning has emerged as the biggest headwind for the USD, with long USD positions perceived as the most crowded trade. Despite expectations for elevated US Treasury yields, conviction in long USD trades is relatively muted.
Key Points:
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Positioning as a USD Headwind:
- Survey respondents identify positioning as the primary headwind for the USD.
- Long USD is regarded as the most crowded trade, surpassing long risk positions.
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Historical Context:
- USD longs are notably elevated compared to historical levels and the past year, aligning with other BofA positioning metrics.
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Muted Conviction in Long USD Trades:
- Only 20% of respondents cite long USD as their highest conviction trade.
- This contrasts with 42% of respondents expecting 10-year US Treasury yields to peak above 5%.
Conclusion:
While positioning presents a significant challenge to further USD strength, the divergence between market expectations for elevated US yields and limited conviction in long USD trades suggests cautious sentiment toward extending the USD rally.
Source:
BofA Global Research