Has the Dollar Peaked? Reading the Late-June Tape
After five weeks of almost uninterrupted strength, the dollar rally is showing its first honest signs of fatigue.
EUR/USD has based around 1.1386 after touching 1.1325 last week, refusing to make new lows despite repeated tests. USD/JPY has stalled at 161.8, unable to extend beyond the mid-June highs. GBP/USD found buyers at 1.3143 and has clawed back to 1.3197. Nothing dramatic — but after a month where everything broke in the dollar’s favor, “nothing dramatic” is itself the signal.
Three reasons for caution on the dollar
First, positioning is stretched. The latest Commitment of Traders report shows speculators at their most bullish on the dollar in over a year. Second, seasonality: the dollar has a well-documented tendency to soften in July as mid-year portfolio rebalancing flows kick in. Third, momentum divergence — the dollar index keeps nudging higher while EUR/USD makes higher lows, a classic sign that the marginal seller is exhausting.
Three reasons not to fight it
The rate gap is still wide and still widening. Eurozone data hasn’t improved. And trends like this one don’t end because they “feel extended” — they end when the data changes, and the data hasn’t.
The honest summary
The dollar rally is tired but not broken. The best trades from here are reactive, not predictive: if EUR/USD reclaims 1.1460, the correction is on and 1.1550 becomes realistic. If it breaks 1.1325 instead, the trend resumes with 1.1200 in its sights. Both scenarios are live, and pretending to know which one wins is the only guaranteed losing trade.
Disclaimer: This is market commentary, not investment advice. FX trading carries substantial risk of loss.
Leave a Reply