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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
USD
While the resilience and YtD rally witnessed in the broader USD (DXY +3.3% YtD and +4.2% from its YtD trough) has caught many off guard (a reminder that the clear consensus at the start of '21 was for a weaker USD), most, if not all, of the "easy" gains may be in the rear-view mirror for the greenback.
- The aggregate net USD short held within the speculative community since the early part of '20 has unwound, per the latest weekly CFTC CoT report covering the week ending 20 July, if we measure the USD-equivalent value of the futures contracts covered by the report (EUR, GBP, JPY, CAD, AUD, NZD, MXN, BRL & RUB). Levered funds' net positioning has also reverted to net long terms in recent weeks, while asset managers have seen a relatively sharp liquidation of a portion of their net short position, although that investor group's positioning remains comfortably in net short territory (at $36.9bn or 20.6% of open interest). As an aside, asset managers have not been cumulatively net long of USD since '17.
- U.S. economic outperformance has failed to materialise in recent weeks (at least vs. expectations, as evidenced by the Citi U.S. economic surprise index's lack of momentum in moving away from 0), with the fate of the Biden administration's fiscal spending agenda becoming evermore important re: the near-term economic health of the U.S.
- Looking ahead, the key domestic points of interest for the USD over the next month or so include the latest FOMC decision (Wednesday 28 July), U.S. Q2 advance GDP reading (Thursday 29 July), June's labour market report (Friday 6 August) & the Fed's annual Jackson Hole Symposium (Thursday 26 - Saturday 28 August).
- From a technical perspective, the DXY hasn't looked back since breaching its 200-DMA in June, and is close to registering a golden cross formation (whereby the 50-DMA moves above the 200-DMA). Still, the YtD high (93.437) represents the next major target for DXY bulls.
Fig. 1: DXY Index
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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