Introduction: Since the start of 2025, the US dollar has been the only major currency to post a significant decline on the forex market. In fact, it is the only so-called major currency to have fallen on Forex this year. Against this backdrop, Donald Trump's trade war has weakened the greenback's image as a safe haven in the face of the risk of global economic recession. Institutional investors have increased their short positions in the US dollar in recent weeks, reaching a net short exposure of US$17 billion according to the CFTC's COT report. It should be noted that the rebound in the US equity market has not led to a strong rebound in the US dollar (DXY), although the latter is stabilizing in the short term against the euro.
The US dollar (DXY) has lost over 8% against a basket of major currencies since the start of the year, and remains under heavy pressure against Asian currencies at the start of the week, notably the Hong Kong and Taiwan dollars.
1) Institutional bearish positioning reaches a zone of excess
Analysis of data from the CFTC's latest COT (Commitment Of Traders) report shows that institutional positioning on the US dollar is reaching excessive levels: on both the EUR/USD and JPY/USD rates, bearish USD positions are reaching high levels which could be close to their paroxysm. The DXY (index of the US dollar against a basket of major currencies) shows a technically bearish monthly close, but oversold signals are increasingly numerous on the weekly and daily horizons. Sellers are beginning to reach the technical thresholds seen in the years 2023 and 2024, and the DXY appears to be stabilizing in the short term as we await the FED's next monetary decision on Wednesday May 7. The case of the dollar against Asian currencies is also revealing: volatility is exploding, forcing monetary authorities such as those in Hong Kong and Taiwan to intervene. This confirms that the dollar's weakness is beginning to generate tensions on fixed exchange rate regimes, notably the USD/HKD PEG.
2) The USD/HKD exchange rate on the decisive PEG of 7.75;
Faced with pressure on its currency, the Hong Kong Monetary Authority was prompted to intervene massively on the foreign exchange market, buying back 6 billion US dollars in one day. This intervention is aimed at defending the PEG, the peg between the Hong Kong dollar and the greenback, threatened by the latter's downward momentum, as the pair flirts with the lower limit of the corridor set between 7.75 and 7.85.
Despite the dollar's notable decline, it would be premature to see it spiraling out of control, and it could stabilize this week with the FED's monetary policy decision on Wednesday May 7. US economic fundamentals remain robust, starting with the labor market, which continues to perform well according to the latest NFP report. Jerome Powell is unlikely to yield to Donald Trump's pressure on Wednesday May 7, and the resumption of the US federal funds rate cut is not expected before the summer.
Conclusion: to sum up, although the correction in the dollar appears to be part of an underlying trend this year, 2025, it is beginning to look oversold in the short term. For the USD/HKD rate, the 7.75 threshold should be kept under very close surveillance this week.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
The US dollar (DXY) has lost over 8% against a basket of major currencies since the start of the year, and remains under heavy pressure against Asian currencies at the start of the week, notably the Hong Kong and Taiwan dollars.
1) Institutional bearish positioning reaches a zone of excess
Analysis of data from the CFTC's latest COT (Commitment Of Traders) report shows that institutional positioning on the US dollar is reaching excessive levels: on both the EUR/USD and JPY/USD rates, bearish USD positions are reaching high levels which could be close to their paroxysm. The DXY (index of the US dollar against a basket of major currencies) shows a technically bearish monthly close, but oversold signals are increasingly numerous on the weekly and daily horizons. Sellers are beginning to reach the technical thresholds seen in the years 2023 and 2024, and the DXY appears to be stabilizing in the short term as we await the FED's next monetary decision on Wednesday May 7. The case of the dollar against Asian currencies is also revealing: volatility is exploding, forcing monetary authorities such as those in Hong Kong and Taiwan to intervene. This confirms that the dollar's weakness is beginning to generate tensions on fixed exchange rate regimes, notably the USD/HKD PEG.
2) The USD/HKD exchange rate on the decisive PEG of 7.75;
Faced with pressure on its currency, the Hong Kong Monetary Authority was prompted to intervene massively on the foreign exchange market, buying back 6 billion US dollars in one day. This intervention is aimed at defending the PEG, the peg between the Hong Kong dollar and the greenback, threatened by the latter's downward momentum, as the pair flirts with the lower limit of the corridor set between 7.75 and 7.85.
Despite the dollar's notable decline, it would be premature to see it spiraling out of control, and it could stabilize this week with the FED's monetary policy decision on Wednesday May 7. US economic fundamentals remain robust, starting with the labor market, which continues to perform well according to the latest NFP report. Jerome Powell is unlikely to yield to Donald Trump's pressure on Wednesday May 7, and the resumption of the US federal funds rate cut is not expected before the summer.
Conclusion: to sum up, although the correction in the dollar appears to be part of an underlying trend this year, 2025, it is beginning to look oversold in the short term. For the USD/HKD rate, the 7.75 threshold should be kept under very close surveillance this week.
DISCLAIMER:
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only. The presented idea (including market commentary, market data and observations) is not a work product of any research department of Swissquote or its affiliates. This material is intended to highlight market action and does not constitute investment, legal or tax advice. If you are a retail investor or lack experience in trading complex financial products, it is advisable to seek professional advice from licensed advisor before making any financial decisions.
This content is not intended to manipulate the market or encourage any specific financial behavior.
Swissquote makes no representation or warranty as to the quality, completeness, accuracy, comprehensiveness or non-infringement of such content. The views expressed are those of the consultant and are provided for educational purposes only. Any information provided relating to a product or market should not be construed as recommending an investment strategy or transaction. Past performance is not a guarantee of future results.
Swissquote and its employees and representatives shall in no event be held liable for any damages or losses arising directly or indirectly from decisions made on the basis of this content.
The use of any third-party brands or trademarks is for information only and does not imply endorsement by Swissquote, or that the trademark owner has authorised Swissquote to promote its products or services.
Swissquote is the marketing brand for the activities of Swissquote Bank Ltd (Switzerland) regulated by FINMA, Swissquote Capital Markets Limited regulated by CySEC (Cyprus), Swissquote Bank Europe SA (Luxembourg) regulated by the CSSF, Swissquote Ltd (UK) regulated by the FCA, Swissquote Financial Services (Malta) Ltd regulated by the Malta Financial Services Authority, Swissquote MEA Ltd. (UAE) regulated by the Dubai Financial Services Authority, Swissquote Pte Ltd (Singapore) regulated by the Monetary Authority of Singapore, Swissquote Asia Limited (Hong Kong) licensed by the Hong Kong Securities and Futures Commission (SFC) and Swissquote South Africa (Pty) Ltd supervised by the FSCA.
Products and services of Swissquote are only intended for those permitted to receive them under local law.
All investments carry a degree of risk. The risk of loss in trading or holding financial instruments can be substantial. The value of financial instruments, including but not limited to stocks, bonds, cryptocurrencies, and other assets, can fluctuate both upwards and downwards. There is a significant risk of financial loss when buying, selling, holding, staking, or investing in these instruments. SQBE makes no recommendations regarding any specific investment, transaction, or the use of any particular investment strategy.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts suffer capital losses when trading in CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Digital Assets are unregulated in most countries and consumer protection rules may not apply. As highly volatile speculative investments, Digital Assets are not suitable for investors without a high-risk tolerance. Make sure you understand each Digital Asset before you trade.
Cryptocurrencies are not considered legal tender in some jurisdictions and are subject to regulatory uncertainties.
The use of Internet-based systems can involve high risks, including, but not limited to, fraud, cyber-attacks, network and communication failures, as well as identity theft and phishing attacks related to crypto-assets.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
This content is written by Vincent Ganne for Swissquote.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
This content is intended for individuals who are familiar with financial markets and instruments and is for information purposes only and does not constitute investment, legal or tax advice.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.