Check out the positioning in the forex market as we were headed into today’s FOMC meeting. Though Walle Smith points out here the crowding into GBP shorts, look at the USD positioning last week as reported by the CFTC. In light of today’s 25bps rate cut, 2 dissenting FOMC members who wanted to hold on interest rates, and verbal confirmation during the press conference from Federal Reserve Governor Powell that there will be no cycle of interest rate cuts, the positioning in the market is not at all stretched. With all of that just happening, there was still room in the long USD trade. Which is very interesting when you look at the trends against the other major world currencies. The market has significant room before it even is considered crowded with long USD positions.
My take is that the Fed has pretty much given markets the green light with no real reason to sell the USD. And it is likely that the USD continues to move higher still.