For Traders from Club iNSIDER: Position Shifting. Why CTAs Reverse the Direction of the Currency Front

DXY – We Haven’t Seen It in a While

DXY is trading around the magical level of 100. Note the ultra-short trendline, which is about to be broken. The 21-day moving average is around 100.5. A close above this level could spell trouble for the much-hated dollar.

1.13 Is Key

The euro is flirting with major short-term levels. A close below 1.13 could quickly punish the many “new” euro bulls. Note that the 21-day moving average is slightly lower.

Time to Exit

CTAs are in urgent need to sell off their long euro positions.

Big Chart on JPY

JPY is above the short-term trendline and currently breaking above the 21-day moving average for the first time since the start of the recent dollar weakness. We’ve seen a similar setup before… but now the long JPY position is massive (chart 2).

CTAs Are Waking Up

CTAs are suddenly actively selling off their long JPY positions.

Dollars Needed for Tech Stocks

The short-term divergence between U.S. stocks and the dollar is very large.

The MAG Connection

The relationship between MAG (likely referring to mega-cap growth stocks like Meta, Apple, Google) and the dollar has been very strong in recent months. With several MAG stocks surging post-earnings and extremely light positioning (chart 2), things could heat up even more… and dollars will be needed to chase these MAGs.