USD: Equities Sell-Off Still About Position-Adjustment But That Could Change This Week – Nomura

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The US dollar was largely sold off with stocks, but there are many moving parts. What’s next?

Here is their view, courtesy of eFXdata:

Nomura Research discusses the current market conditions following up on its last week’s call for an August volatility shock ahead of a crisis in September (see here).

“The risk-off mood in global equity markets is clearly spreading. As of now, the selloff in major equity markets (S&P 500, FTSE China A50, Nikkei 225, etc.) is still mostly a matter of position adjustments by CTAs and other such trend-following investors. Also, there is evidence that some other market participants (ultra-short-term traders and global macro hedge funds) are taking the contrarian step of averaging down.

It appears that selling has not yet set off the sort of chain reaction in which the withdrawal from long positions by speculative traders leads to an allocation shift among investors with longer-term horizons. From this angle at least, many observers may be inclined to see the present selloff as a temporary, mild-to-moderate risk-off scenario similar to the May selloff,” Nomura notes.

The US’s imposition of the fourth round of tariffs on Chinese goods may indeed prove to be a game-changer. If sentiment fails to climb back to around zero (risk-neutral) this week (5-9 August), there is a good reason to worry that the global selloff in equities will metastasize from the present isolated position adjustments by technically-minded investors into market-wide pricing in of erosion in fundamentals,” Nomura adds.

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Yohay Elam – Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I’ve accumulated. After taking a short course about forex. Like many forex traders, I’ve earned the significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I’ve worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.