According to assessments by the U.S. Commodity Futures Trading Commission reports issued on Friday, speculators’ net long positions on the dollar increased in the most recent week while their net short positions on the euro increased.
CFTC data revealed the worth of the net long dollar holding increased to $13.37 billion from $12.97 billion the week before. For the first time in four weeks, net long dollar positions have climbed.
Further CFTC data revealed that the amount of euro net shorts increased to 42,784 agreements, the highest level since February 2020.
Even though the Federal Reserve increased policy rates by 75-basis points at its policy conference in late July, the dollar saw a two-way flow. The market perceived Fed Chair Jerome Powell’s remarks following the meeting as less hawkish on July 27, which caused the dollar to fall to a three-week low versus the yen.
Powell commented that the U.S. economy does not appear to be in a recession based on the level of employment, and a recession is not always necessary to cool super-hot inflation.
However, according to the minutes of the meeting in July, the Fed will keep raising interest rates at its next sessions, though the rate at which it does so will depend on the availability of data. The dollar continued to be supported by the Fed minutes.
The dollar index has increased 1.8% since the Fed’s July meeting. The dollar has somewhat weakened in relation to the yen.
A full-blown recession still appears some distance off, and policymakers’ resolve to control inflation is undeniable, despite indications that the FOMC (or Federal Open Market Committee) may be splitting over how high rates should go. Lead investment analyst at forex broker XM Raffi Boyadjian wrote.
Boyadjian also said that this is the reason why Treasury yields have indeed been able to rise from their lows reached at the beginning of the month, providing additional support for the US currency, which has already benefited from resurgent safety flows.
In the euro zone, where there is a severe energy crisis and mounting recessionary threats, the value of the euro is declining. The euro’s value against the dollar has decreased by around 12% since the start of the year. At $1.0039, it was last down 0.5%.
In terms of cryptocurrencies, net short bets on bitcoin fell from 230 to 93 contracts a week ago. The net shorts for this week were the lowest since late January. Speculative investors were net long bitcoin from late April to early July.
Earlier today, bitcoin was down 8.6% at $21,182, having hit a three-week trough of $21,156 on Friday.
Meanwhile, investors who follow market patterns are becoming more optimistic about the U.S. stock market’s recovery, raising expectations for equities in the second period of 2022.
The S&P 500 has recovered around 15% from its mid-June low after posting its worst first half since 1970. This recovery has been fuelled by firmer corporate earnings and optimism that the economy may escape a recession even as the Federal Reserve hikes rates to control inflation.
People who base their investment choices on market phenomena like breadth, momentum, and trading patterns perceive a more positive outlook and are becoming more confident that the latest gains in equities are not going to be reversed.
Willie Delwiche, an investment expert at market research business All-Star Charts, unveiled that several indications strongly imply that the bottom they had in June is unquestionably more lasting than the lows we experienced in May or March. At this stage, there is no reason to be afraid of the rally; rather, one can lean into it.