The momentum of the dollar's rebound is still there, but the year-end euro target of 1.18 means bulls should not get too carried away. The shift in the inflation narrative is more important than the Fed's hawkishness.

Reuters survey shows that most forex strategists believe the drop in oil prices alleviates inflation and expectations of Fed rate hikes, slowing the near-term rebound of the U.S. dollar, while some analysts see the dollar remaining strong. CFTC data indicates that as conflicts ease, the dollar has rebounded about 4% from its May lows, with long dollar positions reaching high levels. The dollar is supported by inflation above target, economic resilience, high Treasury yields, and the possibility of further rate hikes. Analysts generally disagree with market pricing for another rate hike before year-end, forecasting EUR/USD at 1.16 in September, 1.17 at year-end, and 1.18 in one year.