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Reviewing the latest CFTC Commitment of Traders (COT) Report, Rabobank analysts noted that the net long USD positions were virtually unchanged last week following a modest drop for the first time since mid-June in the previous week.

Key quotes

“Bullish sentiment towards the dollar is unlikely to change as the prospects of prolonged trade war between the US and China do not bode well for emerging markets.”

“Capital outflows from risky assets will therefore provide the dollar with support as demand for US Treasuries is likely to prevail in the coming months. It is worth noting that emerging market exchange-traded funds flows are on the brink of turning negative for the year after investors extended a sell-off for a seventh consecutive week, according to Bloomberg.”

“Those who expect the dollar to weaken on the back of the Fed cutting interest rates have so far ended up disappointed as the Bloomberg Dollar Index actually rallied following the reassurance rate cut announced in July to a new year-to-date high in August when trade tensions escalated.”