The dollar’s rally may be approaching an end as pressure mounts on U.S. President Donald Trump to strike a trade deal with China, according to Brandywine Global Investment Management LLC.
The money manager, which oversees $72 billion, is banking on this view to short the greenback and buy some of the biggest casualties of the trade war, including the Australian dollar. The rationale? Trump will be compelled to make peace with Beijing to protect the interests of American consumers.
But in Brandywine Global’s longer-term view, Trump’s show of hostility may be part of a strategy to drum up support among conservative voters ahead of the 2020 U.S. election.
“We think it’s another round of aggressive posturing,” Lawrence said. “As a value-based investor, we’re contrarian by nature. We’re trying to buy discounted assets.”
They way you make money in trading is by not following the crowd. A year ago, I made a bold statement in that the US dollar would never see $100 again, so I like Brandywine Global’s contrarian bet against the US Dollar. And what I’m looking at is what the Smart Money will be doing over the next couple of months.
The Commitments of Traders (COT) is a weekly market report issued by the Commodity Futures Trading Commission (CFTC) listing the positions held by commercial traders and the “Smart Money”, the hedge funds and bank institutions in various futures markets in the United States. Since the COT measures the net long and short positions held by speculative traders and commercial traders, it is a great resource to gauge sentiment in the Markets.
As the US dollar has been creeping up to the $100 level, open interest has been declining which is telling me the Smart Money has been closing their long positions.
Although sentiment has declined 20%, the sentiment remains bullish at 80%.
Nevertheless, the Smart Money has been decreasing their net long position since the Fall of 2018. Thus, the chart suggests before shorting the US dollar, price must close below the $95 level.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.