The US Dollar Index has slipped into the lower 99 handle after the unexpectedly weak jobs data pushed back expectations for a Federal Reserve rate hike. According to the latest data, US July Non-Farm Payrolls suffered an unexpected decline of 23K versus 80K growth expectations, with the unemployment rate falling a notch to 4.1% as the labor force participation rate dropped to 61.4%. The disappointing employment figures have significantly altered market expectations for monetary policy tightening. As per Investing.com, market pricing (CME's FedWatch) showed the odds of a September rate hike shift from a majority to a minority, reflecting the market's reassessment of Fed policy timing. The US Dollar Index has already retreated significantly from its recent highs, falling below the 100 mark, and the market is waiting for upcoming inflation data to determine the direction of its next phase.
Large currency speculators in the US dollar futures market have significantly increased their bullish positioning, with net long positions reaching approximately 22,499 contracts as of August 4, 2026. According to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC), this represents a 5,302 net position increase compared to the previous week. The current positioning marks the highest level of net longs held by large speculators in the US dollar index futures market in nearly three and a half years. As per InvestMacro, this week's speculator bets rose for a third consecutive week and for the fifth time out of the past six weeks, with the overall net standing reaching the highest level in the last 190 weeks dating back to December 13th of 2022 when the net position was over +25,000 contracts.
The substantial increase in net long positions indicates growing confidence among institutional traders and hedge funds regarding the US dollar's near-term outlook. However, recent market developments show majority long sentiment falling after weekly gains across major indices. The S&P 500 (64% from 68% a week ago), Nasdaq 100 (57% from 62%) and Dow 30 (58% from 61%) have all seen reduced bullish sentiment, with the Russell 2000 (63% from 67%) also showing weaker positioning. According to Investing.com, the US Dollar Index speculator positions have now been above at least +10,000 contracts for eight consecutive weeks, demonstrating sustained institutional bullishness on the currency despite the recent pullback. For US equities, if both the CPI and core CPI come in below expectations, the market may further reduce the probability of a September Fed rate hike, with a retreat in Treasury yields benefiting tech stocks.
The latest COT data reveals that US Dollar Index speculators are currently Bullish-Extreme with a strength score of 100.0%, representing the highest level in the past three years. This compares to the previous week's score of 86.4%, showing significant improvement in bullish sentiment. The Commercials are Bearish-Extreme with a score of 0.0%, while Small Traders maintain a Bullish position with 78.5% strength score. The 6-week change in strength index shows a substantial improvement of 24.6 percentage points, indicating accelerating bullish momentum among large speculators. As per InvestMacro, the US Dollar Index leads the currency markets this week with a 24.6% increase in strength scores, followed by the Japanese Yen at 27.7% and the British Pound at 19.3%.
Despite the positive speculator sentiment, the US Dollar Index price has fallen for two consecutive weeks and dropped under the significant 100.00 level. The DXY had been above this level for the past six weeks but has now slid back into its trading range that had persisted for over the previous year. The current range has a top side of 100.00 with a bottom level support around the 96.50 threshold. It remains to be seen whether rising interest rates can get the DXY back to above the 100.00 resistance, or if the currency will fall back into this range for the time being. As per Investing.com, the US Dollar Index dipped by -0.14% this week, while the Japanese Yen fell by -0.70%, the biggest decliner among major currencies. For the US dollar, a higher-than-expected CPI would mean that US inflation remains sticky, strengthening the case for the Fed to continue raising rates in September or even by the end of the year.
