The greenback wobbles into the August fog

I’m still only trading the dollar on weekly calls, but this short-dollar setup felt too layered to skim over. A word of caution, however, we’re heading into what might be the most data-heavy stretch of the year, in the middle of August — that strange, thin-liquidity month when even good trades can get whiplashed by air pockets and noise. And yet, despite the complexity, the dollar feels like it’s walking into a punch.

Friday’s jobs report didn’t just miss—it deflated the entire sturdy labour market narrative. The three-month average collapsed to 35,000, and investors flipped quickly. Market odds for a September Fed cut surged to 80%. The dollar had been leaning hard on that sturdy payrolls pole, and now it’s buckling. There’s still inflation stickiness, sure, but the jobs data took away the Fed’s last clean excuse to hold.

Then came the political hand grenade. Trump fired the head of the Bureau of Labour Statistics, accusing her of manipulating job numbers for political gain. No evidence, just an accusation. It’s hard to overstate how damaging that is. When you undermine the scoreboard, every game starts looking rigged. That kind of distrust doesn’t just hit equities — it bleeds into Treasuries and FX. If investors begin pricing in a risk premium for U.S. data credibility, the dollar’s got another anvil tied to its ankle.

Add to that the early resignation of Fed Governor Adriana Kugler. Her exit accelerates Trump’s chance to reshape the Fed — possibly setting up the next Powell successor. Kugler was already dovish, but her replacement could be even more politically aligned. And if the Fed’s neutrality begins to erode, policy could turn looser not because the economy demands it, but because the scaffolding has shifted.

This week brings a decent amount of Fed-speak — and their interpretation of the jobs report could matter more than usual. If even one of them softens their tone, it’ll reinforce what the market already suspects: the next move is lower, and maybe sooner than Powell has been letting on.

Meanwhile, $125 billion in long-end supply will hit the tape — 3s, 10s, and 30s. That’s a real-world stress test of confidence. If demand comes in weak, it won’t just be a Treasury issue — it’ll confirm that US political risks are again seeping into the U.S. rates story too. No amount of Fed spin can paper over a botched bond auction in this kind of climate.

The ISM services report on Tuesday is the lone heavy-hitter in terms of hard data. Traders will zero in on the prices-paid and employment subindices. If they both soften, it adds fuel to the cut narrative. If they surprise stronger, maybe we get a short-lived squeeze in the dollar. Either way, I don’t see DXY pushing sustainably in a positive direction as the road is likely to be littered by the Fade Crew.

As for expressions, I still like EUR/USD higher as the cleaner vehicle. The rate spread story shifted sharply on Friday — two-year EUR/USD swaps hit their tightest of the year. The euro has made a solid base near 1.1400, and I’d expect dip-buyers to emerge around 1.1500–1.1525. My eyes are still on 1.1700 to top the next leg higher this week.

USD/JPY, on the other hand, is the misfit this week. Friday’s plunge had as much to do with risk-off as with rates, and the rebound we’re seeing now makes it harder to fade unless US stocks roll over again. It’s too twitchy, too cross-driven, and not where I want to place directional dollar shorts at this point.

So that’s the lay of the land. August can be treacherous, no question. But sometimes the best trades emerge in the chop, when conviction is low and the crowd is offside. Right now, the dollar looks vulnerable — politically, economically, and structurally. And I’m leaning into that while the window’s open.