Dollar Finds Support Amid Balanced Positioning
The US dollar has found support at the start of this week after a round of Japanese yen intervention, which may be over. This has lifted a key source of further downside risk for the dollar. The positioning picture for USD is now more balanced compared to last week.
According to CFTC figures, aggregate net-long USD speculative positioning vs reported G9 currencies was at 26% of open interest on July's Fed meeting day, slightly above peaks in January 2025 and April 2024. Further USD losses require a compelling macro argument, such as soft data justifying a new round of dovish repricing.
Yesterday's ISM manufacturing surprise on the upside suggests strong gains in the employment sub-index. This week's focus is shifting to the jobs market, with JOLTS job openings for June expected to have slowed below 7.5m. Unless ADP tomorrow and payrolls on Friday point to a weakening jobs market, the dollar won't fall much further.
Market uncertainty over US-Iran negotiations may limit downside pressure on oil prices. Pricing for a September Fed hike remains above 50%, with markets maintaining pricing at around 65%. The authors maintain a modest bullish bias on the dollar this week.