On Friday, CNBC reported that on that day options players placed large bets bullish on the dollar:
“The options market is gearing up for a bull run in the dollar after February’s non-farm payrolls showed improvement in the U.S. jobs picture. Options traders saw sizeable downside put buying in the EUR/USD…Before Friday’s payrolls data, the option players were setting up for a long, boring year ahead for the buck, selling straddles in the PowerShares DB Dollar Index Bullish Fund (UUP), a strategy that is most profitable if the dollar doesn’t move much.”
Given in recent weeks that the U.S. dollar has persistently declined even in the face of good economic news and even geo-political fears, I think a more likely explanation is that a group of traders has decided to bet on a successful retest of long-term support for the dollar.
*Chart created using TeleChart:
I am a bit torn over these latest technical developments. While I insisted earlier that the dollar finally looked ready to break this support line, I later decided to make a small bet on one more bounce. One way or the other, I will soon be switching from a small net long dollar position to a bearish one.
Be careful out there!
Full disclosure: slightly net long the U.S. dollar