The dollar dropped momentarily out of its range this week but it is back in its box now.

Last Friday's April US jobs reports produced disappointing numbers,

US jobless claims have increased from previous 257K to the current 274K, disproportionate impact on sentiment but dollar bears are walking a tightrope - they need US real yields to stay low or fall further, while significant risk aversion is avoided.

For now, we're shaking positions out but the dollar's low will be seen in Q2, whatever happens in reaction to this week's data.

We've one toe in the water with short NZD/USD, and now another with short GBP/USD.

The dollar sell-off has seen the DXY Index reach a key support level. The break of pivotal levels in EUR/USD and USD/JPY could trigger an acceleration of the bearish dollar momentum.

We find hedging global dollar risk via non-perfect market implied correlations appealing. 

The DXY Index has bounced off key support at 92.50/92.10, which remains a ‘make-or-break level' of the longer-term trend.

Disappointing US labor market data have made us change our Fed call. We now expect only one hike this year (in September) instead of two. Delayed policy normalization in the US could threaten the apparent détente for a weaker dollar, which has been instrumental in improving market sentiment since February: a weaker dollar has helped stabilize CNY and oil prices, reversing EM capital outflows and improving the US earnings outlook.

However, it has also implied currency appreciation for Europe and Japan, which are still battling deflation and low growth. With little prospect of relief from Fed hikes, the ECB and BoJ could find it increasingly difficult to tolerate a ‘weak dollar accord’.

Buy 2m double digital options are activated for EUR/USD above 1.17 and USD/JPY below 103. Indicative offer: 14% (vs 36% and 26% for the individual digitals, spot ref: 1.1450 and 107.670 respectively).