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2025-07-31 20:42:03
Prelude to a Dollar Rebound: Volatility Plummets, Is a Short-Selling Wave Imminent? ⑴ As market expectations for significant volatility recede, US dollar option volatility is declining. ⑵ Although traders previously primarily bet on further dollar weakness, the likelihood of this expectation being realized is diminishing. ⑶ This trend will encourage speculators to reduce risk and could trigger a large-scale short-covering. ⑷ A wave of short-selling is expected to push the US dollar higher. ⑸ The US dollar is currently supported by relatively high interest rates. ⑹ Furthermore, the Federal Reserve may take longer to adjust interest rates, which will also provide solid support for the US dollar. ⑺ The market is facing the risk of a short squeeze against the US dollar against the Japanese yen. ⑻ Traders holding long euro positions are more likely to sell if the euro falls below the critical 1.1400 level against the US dollar. ⑼ Overall, multiple factors are creating favorable conditions for a US dollar rebound.
