Popularity is never a good thing

I have started to turned bearish for US$ since early 2017 (you can see here and here). But a dollar downtrend is not a straight line and it will try to do a dead cat bounce from time to time. We got such a rebound last September as I suggested. Turned out to be a spot on call. After a month or so, US$ started its next leg down again and here we are, it has reached its 3 years’ low below $90 of the dollar index. Is it done for the dollar’s downtrend? I don’t think so but here is the thing, it is never a good idea to go with popularity in trading. After a waterfall type of down drafting in the past 2 months, it has become a very popular idea to short US$. This has been especially intensified by Treasury Secretary Steven Mnuchin’s comment that a weak US$ could be good for the US. Even though rarely any governments would openly talk down their own currency, in reality, almost everyone government is doing what they can to debase their currency as a weak currency is definitely good for their exports. Regardless you believe Mnuchin or not, the long term trend for US$ will continue to be down. But at the moment, the public sentiment is too bearish and shorting US$ has become a very popular trade. In the trading world, popularity is hardly a great thing and it often leads to a turning point short- or long-term. I think we are at this turning point now for US$ although it will be another short-term dead cat bounce!

 Here is what I'm thinking: US$ index will likely move up towards its resistance around $91 in the following weeks ahead! If you are shorting US$, better take your profit off the table now before everyone else wants to exit!!