Dollar Hits New 52 Week High

New 52 week low for EURUSD.

Also the Baltic Dry Index tumbles again.

Dollar Rally

In yesterday's post, I mentioned that with record low dollar sentiment, it was a bad time to short the dollar.

Today we are having a nice dollar bounce - up over a percent and has crossed above the 10 day moving average. I could see a further dollar rally from here, with commodities and equities selling off hard.

Maybe it could be the start of something very deflationary?

Record Low Dollar Sentiment

Now is a really bad time to bet against the dollar.

Sovereign Speculator: "Exit or Hedge All Market Risk"

This is one of those times where markets are stretched to the limit and any further upside will be minimal in relation to the extreme risk entailed. Sentiment has been dollar-bearish and risk-bullish for so long that a violent reversal is all but guaranteed. This is not to say that the absolute top is in, but that at the very least, another episode like last April-June is coming up.

Also well put:

Or I can put it this way: the Fed has increased the monetary base from 850 billion to 2500 billion since 2007. Have your bank balance, salary and monthly bills increased 200%? If not, why should stock and commodity prices?

Sovereign Speculator: Silver spikes are dollar-bullish

"[The dollar] had a major bottom in 1980 just as everyone was panicking into precious metals. Silver spikes are apparently another symptom of extremely negative dollar sentiment, so should be considered bullish for the currency."

Sovereign Speculator: The dollar already crashed

The time to be shouting about a dollar crash was 2000, but the dollar-crash meme only got mainstream in late 2007. As you can see in this 10-year chart of the trade-weignted dollar index, the crash had by then already happened.

"Major dollar rally coming soon, to a trading screen near you."

As always, the timing is the most uncertain factor here, but the longer the dollar sentiment stays low, the less risk there is in this trade and the stronger the resulting rally will be. I can’t say whether this will come next week or in early June, but we are at the point where traders should be nervous about short-dollar, long-risk positions, because that trade is running on momentum alone and meets the requisites for sudden reversal.