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US Dollar Is Dominating the Forex Markets


Jun. 19 2018, Updated 8:05 a.m. ET

US dollar rebounded last week

The US Dollar Index (UUP) managed a sharp recovery last week. The appreciation seemed to be due to tariff announcements instead of the Fed’s hawkish tone after the May FOMC meeting. The only interpretation of the rise in the US dollar would be that investors were seeing trade tensions as a temporary setback to global trade, which could result in a better deal for the US. The US Dollar Index closed for the week ending June 15 at 94.78 and appreciated 1.3%.

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Speculators turned bearish on the US dollar

According to the latest Commitment of Traders report released on June 15 by the Chicago Futures Trading Commission, large speculators and traders increased their bearish positions on the US Dollar Index for the second consecutive week. According to Reuters’ calculations, the US dollar’s (USDU) net short positions increased from $5.54 billion to $7.42 billion. The net short positions are a combination of the US dollar’s contracts against the combined contracts of the euro (FXE), pound (FXB), yen (FXY), Australian dollar (FXA), Canadian dollar (FXC), and Swiss franc.

Trade tension   

Investors’ main focus this week would be trade tension between the US and its trading partners. More tension led to the US dollar’s appreciation in the previous week. Economic data from the US is limited to PMI data. The data likely won’t have a major impact on the currency. Overall, the US dollar will likely dominate the forex space. The Fed is the only central bank pursuing a tightening policy, while the other developed and developing markets remain accommodative. Next, we’ll analyze the slide in the euro after the European Central Bank’s meeting.


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