Dollar Seeks Recovery Amid Strong Jobs Market

The dollar has found some support at the start of this week, likely due to the recent intervention in the JPY market and a more balanced positioning picture for USD. According to CFTC figures, aggregate net-long USD speculative positioning against G9 currencies is around 26% of open interest, which is slightly above previous peaks.

A strong ISM manufacturing report yesterday with significant gains in the employment sub-index suggests that the jobs market is still strong. This is expected to limit further dollar losses for now, especially if ADP and payrolls on Friday show a steady labor market.

The market may maintain pricing for a September Fed hike above 50%, which would keep a modest bullish bias on the dollar this week. EUR/USD is seen as slightly overvalued, with our short-term fair value model suggesting it's around 0.5-1% overvalued at current levels.