It’s all about the dollar as bets rise

In a trending market like the US dollar, it's all about knowing when to take profits and when to buy a dip. The US dollar dip came ahead of non-farm payrolls on Friday as a strong report led to a huge day for the dollar. Despite the momentum, the weekly CFTC data doesn't yet show an overcrowded dollar trade. 1 of 2 USDCAD Premium longs issued on Tuesday hit the final target, while 1 of the 2 pre-NFP USDCHF Premium long nears its final target. All trades are found in the Premium Insights.

Non-farm payrolls rose 248K compared to 215K expected but that wasn't all. Revisions were higher and unemployment fell to 5.9% from 6.1%. The lone negative was in avg hourly earnings but better wages generally lag employment growth.

The US dollar jumped initially and then continued to rally throughout the day. On the week, the pound was the laggard as it plunged below 1.6000. The best sign for the dollar might have been that it closed near the weekly highs right across the board.

The Fed meeting isn't until the end of the month but traders begin to price in more-hawkish commentary once again and we'll be closely watching the Fedspeak in the week ahead.

The other area to watch is the commodities market. Oil and gold are teetering and US dollar strength could be the tipping point that shakes out long-term commodity bulls. Watch $1175 in gold.

Commitments of Traders

Speculative net futures trader positions as of the close on Tuesday. Net short denoted by - long by +. EUR -137K vs -142K prior JPY -121K vs -105K prior GBP +3.5K vs -1K prior AUD -2K vs +8K prior CAD -3K vs +3K prior CHF -12.5K vs -14K prior NZD 0K vs +2K prior

The euro and yen are definitely the favored spots for dollar longs but even though dollar bullishness is high, it's not extreme. We'll be watching closely in the weeks ahead.