💵 U.S. Dollar Outlook: Commercials Step In as Seasonals Turn Supportive

💵 U.S. Dollar Outlook: Commercials Step In as Seasonals Turn Supportive

Contract: DXU25 | Week of Sept 1, 2025

🔑 Quick Take

Commercial traders are quietly increasing longs in Dollar Index futures just as seasonal tailwinds kick in for September. While speculative money remains net short, stronger U.S. consumer spending and sticky inflation could lend support. The bias this week tilts slightly bullish, but the Dollar must defend key support near 97.50 to validate a rebound.

📊 COT Breakdown (as of Aug 26, 2025)

• Commercials (hedgers): Longs ↑ +1,048 to 12,326; shorts ↓ 55 → clear signal of “buying weakness.”
• Non-Commercials (specs): Longs ↑ +1,799, shorts ↑ +1,916 → still net short -6,105 contracts, pressing the bearish side.
• Takeaway: Divergence — “smart money” leaning long vs specs still betting against the Dollar. This often marks turning points.

🌍 Fundamentals Driving the Dollar

• Stronger U.S. consumer spending (biggest jump in 4 months) and sticky core PCE inflation argue for a hawkish Fed tilt, supportive of the Dollar.
• Headwinds: Dollar weakened vs Chinese yuan (9.5-month high) and on concerns about Fed independence.
• Yields: Falling Treasury yields capped gains and kept USD under pressure.
• Cross-market moves:
  • Gold and Euro gained on USD softness.
  • S&P 500 extended highs on dovish expectations.
  • Crude oil fell on global growth concerns, reflecting risk-off sentiment.

🔎 Open Interest & Conviction

• Total OI: ↑ +2,597 to 31,488 → new capital flowing in.
• With commercial longs rising alongside OI, conviction appears to back the reversal case.

📅 Seasonality Check

• September avg return: +0.63% (positive in 67% of past years).
• Range: Best +4.40% | Worst –4.63%.
• Read: Seasonal stats skew modestly positive, adding a supportive tailwind to the bullish case.

📉 Technical Positioning

• Current price: 97.69, nearer 52-week low (96.00) than high (109.16).
• Resistance: 97.97 → 98.24 → 98.42.
• Support: 97.52 → 97.34 → 97.07.
• Structure: Dollar is range-bound, sitting just above support. A bounce could challenge resistance; a break lower risks retesting cycle lows.

📌 Trader’s Playbook

• Bias: Slightly Bullish, but fragile.

Bullish Path

• Trigger: Hold above 97.52 and reclaim 97.97.
• Target: 98.24 → 98.42.
• Catalysts: Hot inflation prints, firm consumer data, or stabilization in yields.

Bearish Path

• Trigger: Break below 97.34.
• Target: 97.07 → 96.00 (52-week low).
• Catalysts: Persistent yuan strength, further Treasury yield declines, or Fed credibility concerns.

Risk Note

Specs remain net short, so any upside squeeze could be sharp. Manage size carefully into Fed speakers or major data.

📅 Outlook

The Dollar enters September with commercial backing + seasonal support, but price action is yet to confirm. I’ll lean slightly bullish, watching 97.50 as the line in the sand. Above 97.97, longs have room to run; below 97.34, the bearish tide resumes.

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Trade smart,

Joseph O.

SmartMoneyTrade.com

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