US dollar net longs hit 10-month high

Speculators boosted positive bets on the US dollar for a second straight week, with net longs rising to their highest since mid-January. The value of the dollar's net long position rose to $24.82 billion in the week ended November 29 from $22.25 billion the previous week, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.
Friday's US nonfarm payrolls report, which showed job gains of 178,000 last month, underwhelmed investors because of downward revisions to the previous two months and a drop in average hourly earnings. That should not, however, deter the Federal Reserve from raising interest rates this month, but the tightening pace could slow after that, said Kathy Lien, managing director or FX strategy at BK Asset Management in New York.
The dollar's gains could ease going into next year as a result. "The US dollar has had a great run but after Friday's data the uptrend is exhausting with the market fully discounting a 25-basis-point rate hike," Lien said. "As the rate decision nears, we could see more two-way action in the currency."
For the year, the dollar index still shows a gain of 2 percent. Speculators, meanwhile, turned net short on the Japanese yen for the first time since last December to 269 short contracts, from net long contracts of 10,900 the previous week. The yen has struggled in the wake of the dollar's recent surge. It did get a reprieve on Friday with the dollar pulling back a little bit, but the outlook, both fundamental and technical, remained skewed in the greenback's favor.
"The safe-haven Japanese yen has remained in severe pullback mode as equity markets have continued to maintain the 'Trump Rally' and Opec-driven risk in the energy markets has instantly dissipated," said James Chen, head of research at Forex.com in Bedminster, New Jersey. Chen added that if dollar/yen is able to maintain above 114.00 yen, strong upside momentum for the dollar and a lagging yen could push the pair towards its next major resistance targets at 116.00 and 118.00.