FX Daily: Dollar can recover some ground – if data allows
At a Glance
The desk anticipates a potential recovery in the dollar, contingent on upcoming U.S. economic data, particularly labor market indicators. Per the full note, a recent round of JPY intervention has alleviated some downward pressure on the dollar's value, contributing to a more balanced speculative positioning compared to the previous week. As soft data could necessitate a dovish repricing from the Fed, the current expectation is that only robust reports, especially concerning payrolls, will substantiate any further dollar weakening. Thus, trading desks should closely monitor the JOLTS report and upcoming ADP figures as pivotal catalysts in this short-term narrative.
Key Takeaways
- 01The dollar may recover if upcoming labor market data is favorable, specifically from the JOLTS and payroll reports.
- 02Recent JPY interventions have eased short-term selling pressure on the dollar, creating a more balanced speculative positioning.
- 03The dollar's trajectory in the near term is largely contingent on U.S. economic data, particularly employment statistics.
- 04Some firms forecast lower dollar values amidst expectations of soft payroll figures, indicating a divided market sentiment.
Full Analysis
What the desk is arguing
The desk frames this as a crucial moment for the dollar, poised for recovery if labor market data supports it. With JPY intervention having momentarily stabilized market sentiment, the dollar's speculative positioning appears healthier, easing concerns about excessive overbought conditions observed in earlier reports.
The commentary underscores that current net-long positioning in the dollar stands at around 26% of open interest in major currencies, a notably high figure since 2019, which suggests that traders are re-evaluating their positions amid mixed macroeconomic signals. This week’s focus on job openings and payrolls can either reinforce the dollar’s strength or prompt further selling depending on the outcomes.
Where it sits in our coverage
Our consensus target for EUR/USD is currently set at 1.1700, with a range between 1.1200 and 1.2000. Notable firm targets for Dec-26 include: - bofa: 1.1240 - commerzbank: 1.2200 - deutschebank: 1.2500
This projection suggests that the desk’s view aligns closely with the broader market expectations as reflected in our coverage, sitting comfortably within the mid-lower range of consensus forecasts. Given that the dollar's strength or weakness hinges on payroll outcomes, it could impact broader EUR/USD trajectories as well.
How other firms see it
Most firms, such as goldman and morganstanley, appear to forecast slight dollar depreciation in line with expected softening employment numbers. Conversely, deutschebank and commerzbank seem to hold a more bullish outlook for the dollar against the euro, indicating differing perspectives on future dollar strength.
Traders should also consider the potential correlation with other pairs like NZD/USD, where central bank policies and employment figures can influence perceptions of dollar resilience against the Antipodeans, especially in light of upcoming RBNZ rate decisions.
Market Implications
Watch the JOLTS job openings report and Friday's payroll figures closely, as they will likely dictate the dollar's short-term trajectory. A strong performance may solidify bullish sentiment, while disappointing results could reignite bearish positioning against the dollar.
EUR/USD — All Desk Targets
| Firm | Stance | YE 2026 |
|---|---|---|
Bank of America | Bearish | 1.1200 |
ANZ | Bearish | 1.1400 |
UOB | Bullish | 1.1565 |
From the original
Articles FX Daily: Dollar can recover some ground – if data allows Published 07:30 FX Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download The dollar is trading on firmer footing at the start of this week. With this round of large-scale JPY intervention on
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