After the US dollar rose for two consecutive days, foreign exchange traders are struggling to maintain their bearish positions on the dollar.
Despite the Bloomberg Dollar Index falling to its lowest level since 2023 on Monday, it rose by 1% over the two days up to Wednesday, putting pressure on bets of a weakening dollar.
Jerry Minier, co-head of G-10 foreign exchange trading at Barclays in London, said: “A lot of more tactical positions have been unwound.” By Tuesday and Wednesday, market participants “had returned and were ready to play down the extreme scenarios.”
The dollar has declined this year amid concerns that policies of the Trump administration could lead to a US economic recession. This week, the dollar rebounded after President Trump said he had no intention of firing Federal Reserve Chair Jerome Powell and seemed to ease his stance on tariffs against China.
Anthony Foster, head of G10 spot trading at Nomura International in London, said that the illiquidity move “prevented some people from selling the dollar when the euro-dollar and dollar-yen pairs fell below the key 1.1500 and 140 levels respectively.”
According to the Commodity Futures Trading Commission, last week, speculative net short positions in the dollar against 10 currencies and the dollar index soared to $40 billion, the highest level since October.
Nomura’s Foster and Brent Donnelly, president of New York-based Spectra FX Solutions LLC, said that in the long term, the US dollar is still expected to weaken.
A division of UBS Group has for the second time in less than two months lowered its forecast for the US dollar, saying the currency’s performance depends on the outcome of the trade confrontation between China and the United States.
Shahab Jalinoos, Alvise Marino and Vassili Serebriakov of UBS Investment Bank said that President Donald Trump’s tariff policy has had a more negative impact on capital flows in the United States than they had expected. These strategists turned bearish on the global reserve currency, the US dollar, in March, but on Wednesday they strengthened their outlook for other safe-haven currencies such as the euro and the Japanese yen.
Jalilnos said in an interview, “The market is currently highly concerned about the damage the US itself will suffer due to its aggressive tariffs, which is even greater than that of the countries exporting products to the US. Therefore, the US dollar has actually transformed from a safe-haven currency to a risky currency.”
UBS strategists expect the euro to rise from around 1.13 against the dollar on Wednesday to 1.23 by the end of the year, while the yen is projected to climb from around 143 to 130 against the dollar.
Technical analysis:
Gold: After the overnight price dropped below 3260, a strong rebound occurred, and the early morning session recaptured the resistance area of 3330/40. Currently, the price has returned to the demand zone near 3320. We suggest closely monitoring the signal of a bullish engulfing pattern breaking out here. For detailed positions, please consult the plugin.
(Gold 15-minute chart)
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Nasdaq: Yesterday, our plugin clearly reminded that when the price reached 18,865, a buy limit should be placed at 18,757. This strategy can safely capture a wave of gains. For today, we suggest waiting for the price to break through the 18,880 – 19,000 range for the second time before looking for a demand zone to buy. For detailed positions, please consult the plugin.
(NASDAQ 15-minute chart)
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Crude oil: As Trump has postponed the full reciprocal tariffs for 90 days, the pressure on oil prices from recession concerns has been greatly alleviated. After the price dropped to around 61.50 overnight, it has shown a consolidation pattern. Pay close attention to the price breaking above the sideways range during the day and look for opportunities to buy. For detailed positions, please consult the plugin.
(Crude Oil 15-Minute Chart)
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Today’s key economic data and events to focus on:
16:00 Germany April IFO Business Climate Index
19:00 UK April CBI Industrial Order Expectations Diff.
20:30 U.S. Seasonally Adjusted Initial Jobless Claims (thousands) (to 0419)
20:30 US March Durable Goods Orders (MoM) Preliminary Estimate
