The aggregate long position on the dollar increased by 2.665 billion over the reporting week and reached 3.558 billion, this is the maximum since the beginning of March last year. Although the FOMC meeting last week muted some bullish expectations, the long-term shift in sentiment is moving in favor of the dollar.

The CFTC report should be interpreted as bullish for the dollar. Despite the fact that the dollar weakened at the end of last week, these movements should be considered as corrective. In favor of further growth in demand for defensive assets, the official data of China's PMI, published on Saturday, showed a further and stronger-than-expected decline in the manufacturing index.

The likely slowdown in China led to a sharp decline in demand for raw materials on Monday morning, iron ore futures fell by 9-10%. It is not the decline in the PMI that also plays a significant role in the fall, but the intention of the Chinese authorities to limit growth. China's steel production increased by 12% in the first half of 2021, and China is raising export duties and canceling subsidies for rolled products, which should eventually limit output.

The growth of the dollar also limits the introduction of a permanent repo mechanism, under which liquidity will be supplied during the future curtailment of the QE program. Thus, the growing demand for the dollar will be covered under this mechanism, including for foreign banks. At the current stage, this does not matter much, since there is already excess liquidity, but as soon as the reduction begins, the importance will increase. This is essentially an indirect factor that the Fed is actually preparing to start reducing QE.

This week, the key event is the report on the US labor market for July, since employment at this stage is a key factor in predicting further Fed actions. So far, the forecast is +900,000, but earlier on Wednesday, ADP reports on employment in the private sector and ISM reports on the services sector will be released, which may make adjustments to expectations.

EUR/USD

The euro's net long position declined by 1.116 billion to 5.632 billion, the lowest since March last year. At the same time, on a number of other indicators, the euro is showing attempts to stop the fall, which is reflected in the fact that the target price, which remains below the long-term average, stopped the fall and shows signs of a reversal.

Part of the reversal attempts is explained by the multidirectional macroeconomic data published on Friday. While Europe's GDP growth rates and the dynamics of the labor market in Q2 came out better than expected, the report on personal spending in the United States showed stagnation in consumer demand growth, which led to a slight shift in the yield spread in favor of the euro.

The ECB has no prerequisites for curtailing the procurement program and, most likely, will lag behind the Fed, hence the positioning of speculators who bet on the outstripping growth of the dollar. The corrective growth is limited to the 1.1950/2000 zone, where the euro will face strong resistance. In the long term, we expect the euro to move to the 1.17 support with an eye to the 1.1490/1510 zone.

GBP/USD

A meeting of the Bank of England will take place on Thursday, no change in rhetoric towards a hawkish side is predicted, since there is no reason for this. The delta variant sets in, and it is not possible to take advantage of earlier vaccinations, and the pace of GDP growth does not allow counting on a decrease in the budget deficit, which ultimately could lead to the threat of a fiscal break if asset purchases are reduced.

The net-short position on the pound increased by 195 million to -493 million, the advantage is not expressed, while, as in the case of the euro, the settlement price shows the first signs of a reversal.

The current level of GBP/USD looks attractive for renewed sales. If BoE does not give hints of QE curtailment, then the pound will go down with an eye on 1.3480. If BoE surprises the markets with a bullish comment, then corrective growth may develop to 1.40 and higher, where a transition to a sideways range is likely.