The US dollar withstood a second, successive negative GDP print in Q2, which is typically shorthand for a recession. Economists at Scotiabank think the USD bull cycle is looking very extended but USD bears will have to remain patient.

Dollar poised to remain firm amid few alternatives

“Despite the US economy falling into a ‘technical recession’, investors continue to feel that there is no viable alternative to the USD as the Fed pushes ahead with tighter monetary policy.”

“We expect the USD to remain firm in the next few months but significant or sustained gains may be hampered by stretched valuation (the DXY is trading one standard deviation above its 10Y moving average) and stretched USD-bullish positioning among investors.” 

“A lot of good news is already priced into the USD and the currency is starting to look overvalued.”