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Net USD Specs Continue To Rise As USD Remains Strong

FOREX
  • Net long specs on the US Dollar continued to rise in the week ended May 10, increasing by 299.1K to a total of 178.4K contracts.
  • Momentum on the dollar has been mainly driven by the renewed geopolitical tensions, the ‘hawkish’ Fed tone and surging stagflation risks.
  • Even though odds of a 75bps hike in June have fallen considerably following the Fed May 4 meeting, a 'large 75bps' over the summer cannot be ruled out if inflation continues to come in higher than expected.
    • As a reminder, CPI inflation came in at 8.3% YoY in April, slightly more than expected (8.1%) but down from 8.5% the previous month.
  • However, 50bps hikes combined with the elevated market uncertainty should be enough to support the USD in the near to medium term.
  • DXY index broke above its 104 resistance last week and is currently trading at its highest level since December 2002.
    • Next level to watch on the topside stands at 107.31.
    • On the downside, support to watch below the 104 level stands at 103.37.

Source: Bloomberg/MNI.

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