The US Dollar has been in distribution with large speculators unwinding their net long positions (COT Report) that had been building since mid 2000. Currently the longs and shorts are matching each other and there is no commitment in the US Dollar. The volume signature has also decreased. The correlation with the 10 year bond yields has also shown a significant divergence especially since the start of 2018. Bond yield are increasing but this has not stimulated investment into the Dollar. If this bond yields continues to rise it could stimulate investors as the benefits could out-way the risk. With all the uncertainty in the market large speculators are playing the waiting game. However, when there is a contraction in a market a big move can be expected and when the large players have clarity on which side they are committing we can ride the wave with them. The divergence in bond rate differentials can be seen in dollar pairs and could create opportunities when correcting.
