### POV: DOLLAR'S PULLBACK A PAUSE, NOT AN...>

DOLLAR: ### POV: DOLLAR'S PULLBACK A PAUSE, NOT AN END, OF THE GREENBACK RALLY

-The DXY has dropped as much as 1.3% from the highs of the year, but market

pricing indicates a pause, and not an end, of the rally that began in earnest in

mid-April. To confirm the return of bullish momentum in the DXY, markets look

for a break above, firstly, the 2018 high and then the 200-WMA at 94.709.

-CFTC positioning data continues to move in the USD's favour. MNI's FX PI shows

USD sentiment improving to the best levels in a year at the expense of EUR and

GBP positions.

-Yield differentials continue to make the case for further USD strength as the

US10y holds above 3%. While the US/GE 10y spread has pulled away from

multi-decade highs, it remains over twice as high as the post-crisis average of

~105bps. Meanwhile, EUR/USD sits just 4% below the post-crisis mean.

-Nonetheless, the composition of the DXY may make the USD appear deceptively

strong. The CNY is one of the few major currencies that technically and

fundamentally looks strong against the USD, but is excluded from the DXY in

favour of (in order of size) the EUR, JPY, GBP, CAD, SEK and CHF.