The news isn't always telling but how a market reacts to news is.
In the past two weeks there were a series of surprisingly-resilient US economic data prints. Those highlighted how the Fed might need to keep rates high to fight back inflation. Despite that, the dollar didn't get much of a boost from the numbers.
Today though, the ISM manufacturing report came in at 50.9 against 52.5 expected and there's been a big reaction. The dollar has slumped across the board, including large moves against the commodity currencies on the day and GBP.
What the opposing reactions show is a market that's saturated with USD longs.
This is a preview of what we're likely to see if/when the Fed pivots and will start to materialize as more economic numbers disappoint. It sets up a scenario where there's a skew in data: If it's strong, it doesn't benefit the dollar but if it's weak, the dollar tumbles.
