The most crowded trade today is the strength of the US dollar. A combination of factors such as being the world’s reserve currency, a hawkish fed policy and, to certain extent, having the most liquid market in the world, have attracted foreign capitals into the US currency. If you look at the chart below, it looks like the trend may be reverting. At this point it’s just a tick into negative positioning, although long books have been decreasing since the end of September. If the trend is confirmed, it may mean the unwinding of that trade, and that could be abrupt, since there’s a lot of money on the same side of the trade. That has big implications to risk-on assets, such as #emergingmarkets debt and Equity, #smallcaps, among others.
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