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Dollar traders weigh risks as Fed seen delivering hawkish hold or neutral

FXStreet notes that July oil swings helped fuel heavy USD long positioning, but cooling US data and a weaker backdrop could trigger unwinds if the Fed tone disappoints.

Reported · Written up by our desk · Major Pairs

Financial markets are positioning ahead of the Fed Open Market Committee decision, with debate intensifying over whether a hawkish hold can sustain recent USD strength or whether crowded dollar longs face a dovish repricing.

FXStreet reports that MUFG strategist Lloyd Chan expects the FOMC to keep rates unchanged while reiterating elevated inflation risks, a stance he says would keep US yields supported and weigh on Asia foreign exchange more broadly.

The same article contrasts that view with DBS Bank strategist Philip Wee, who cautions that speculators with large long USD positions may be vulnerable. He links the buildup of those bets to earlier crude price strength, noting Brent’s rally from $70 to $100 in July, followed by oil retracing.

FXStreet also highlights that softer US macroeconomic signals, including cooling consumer confidence and weaker labor additions, are central to the disagreement. It adds that even with July market pricing implying roughly a 34% chance of a 25 bps rate hike, the risk remains that traders may need to reduce exposure if the FOMC delivers a quiet or neutral hold.

Latest closeWTI crude $81.23 ▼1.7%|Brent $85.92 ▼2.8%

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