Morgan Stanley released a note on Friday (seen by Reuters ) indicating that the greenback is at its most oversold level in 40 years, with growing chances of a near-term reversal.
The investment bank recently closed its bearish dollar trade when it became “tactically neutral” on the North American currency normally seen as a safe haven and closing long buy positions on the euro and the Australian dollar.
Morgan Stanley then added that he believes the chances of even excessive growth in stock values increase, following the improvement in corporate earnings and investment inflows over the past 15 days.
A sentiment indicator called Combined Market Timing Indicators is now signaling for the first time "selling" since January 2018, again according to the business bank, so there is a risk of excessive growth in stocks. turns out to be a speculative bubble.
Actually, at this time, selling the dollar is the most popular trading, really very crowded. at the same time, however, Goldman Sachs believes that, for reasons related to the economic cycle and the fact that, on a global level, the dollar still appears overvalued. So right now two of the main investment banks are giving diametrically opposite indications against the dollar.
The very complicated international and domestic American situation has damaged the dollar, but some international destabilizing event could bring it back into vogue as a safe haven currency. Maybe they are both right and the difference is only in the times: surely sooner or later all those who are exposing themselves to the decline of the dollar will be punished, but the question is when?
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/130398-2/ on Mon, 10 Aug 2020 06:00:09 +0000.