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2025-07-29 23:11:56
[Dollar's Strong Rebound, Short Sellers Face Risk] The dollar's strong rebound is squeezing established short sellers. The US-EU tariff agreement has accelerated the euro's momentum, initially seen as a classic "buy the rumor, sell the fact" pattern. However, a closer look at the trade deal reveals that it significantly benefits the US while disadvantages the EU. This, in turn, contradicts the bearish view on the dollar. While EUR/USD positioning has narrowed significantly following Monday's plunge, further correction remains possible. The pair has fallen below key support at 1.1572. A close below the 55-day moving average (1.1538) could further reinforce the view that the pair has peaked, at least in the short term, opening the door to a further decline to 1.1275-1.1300. The catalyst is likely to come from the Federal Reserve's decision on Wednesday. No policy changes are expected at this meeting, and the focus will be on the vote, with at least one dissenting vote expected. As previously mentioned, if Fed Governors Christopher Waller and Michelle Bowman had dissented, the market might have maintained its expectations of a 60-65% rate cut at the September meeting. However, most committee members disagreed, preferring to remain on the sidelines to assess the impact of tariffs on inflation, which will not be known until at least October. (Refinitiv)
