Beware overcrowding in long Dollar

According Bank of America Merrill Lynch survey highlights published in Financial Times, about 200 fund managers, with $576 billion asset under management think that Dollar is currently the most overcrowded trade and 81% of them expect US Federal Reserve to hike interest rates in December.

This overcrowding over rate hike bets stands as key risk to Dollar, even simple profit booking after the actual hike could lead to massive turmoil.

We at FxWirePro think, though the trade is overcrowded it is just not enough to pull out of US Dollar and as a matter of fact Dollar could move even higher ( not denying there could be massive profit booking after hike) after correction if upcoming data to be as block buster as October payroll.

We expect, key decider will be data, especially inflation. If inflation do picks up, path of rate hike would be much steeper, which would be cue for Dollar's next move. Nevertheless, we do expect FED to give long pause after rate hike mostly in December.

The figure courtesy BAML and Financial Times.