Dollar bears are creeping out of the woodwork and wondering what they can sell it against, while bulls are retreating into the shadows as weak data in Europe (notably but not exclusively) fails to give the Dollar a lift. Is this a pause, or a turning point? Our best guess is that this is neither a clear turning point nor a pause that will be followed by another leg higher. 

The positives for the Dollar are that the economy continued to outperform dramatically and relative rates are still inching in its favour. 

The bearish Dollar case will be much clearer next year when household savings are weaker, monetary tightening effects are clearer and Fed easing is closer. However, we may be stuck in a range for the rest of the year. 

Positioning will be an anchor, and there’s a lot of bad European news priced in. For EUR/USD 1.04-1.08 might capture all the action for the coming weeks, but USD/JPY has room to fall back into a 145-150 range, and at the other extreme, NOK, SEK, AUD and NZD (all down by over 5% this year against the USD) have some room to rally.