Asset managers and institutional investors increased bearish bets on the dollar to a record high. That happens amid expectations that slowing US inflation will hasten the end of the Fed’s 16-month policy tightening.
According to Commodity Futures Trading Commission data on eight currency pairs, investors, including pension funds, insurers, and mutual funds, increased their net short position in the US dollar by 18% to 568,721 contracts in the week to July 18.
On July 12, the spot dollar index fell the most in six months after published reports in the US showed inflation slowed more than economists had forecast in June.
At the same time, the Fed will raise its key rate by 25 basis points this week and could start cutting the benchmark rate early next year.
The largest increases in short dollar positions are seen against the euro and the pound among the other main eight currencies.
The market is gearing up for several key policy decisions this week, including the Fed on Wednesday, the European Central Bank on Thursday, and the Bank of Japan on Friday.
The final recommendation is to buy GBPUSD with a target of 1.3300.
Stop-loss is set at 1.2400.
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