UBS Says Dollar Long Positions Return Amid Equity Pullback

3-line summary

• UBS said commodity trading advisors (CTAs) have rebuilt US dollar long positions with roughly $330 billion in buying, while trimming equity exposure across markets over the same period, per Investing.com; equity selling has been concentrated in Europe and emerging markets, while the more tech-heavy US and Asian markets held up relatively well. UBS expects further European equity selling, flagging France as most vulnerable, and warned that while room for additional CTA dollar buying looks limited based on its simulations, a continued equity downturn could trigger large-scale selling.
• The report did not specify exact currency-pair moves, but gave qualitative flow outlooks: currency rebalancing is largely over with only modest flows expected over the next two weeks; Asian currencies offer the biggest short-covering opportunities; and further dollar-long buildup is expected against the Chinese yuan and Colombian peso. On other assets, UBS described CTAs as heavily short duration on bonds with momentum indicators nearing extreme bearish territory, a positive outlook on energy commodities, a negative one on precious metals, expected selling in industrial metals like tin and aluminum, and selective short-covering in lead, palladium and platinum.

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