In a note late Tuesday on the performance of the greenback, Goldman Sachs said last week's disappointment on payrolls offers an important insight on positioning.
Even though the data was weaker-than-expected, the dollar rose marginally in the minutes after the release. A surprise move considering that disappointing data usually increases the chances of a central bank being more dovish.
"This is a testament to just how low expectations have fallen with respect to U.S. growth and the Fed," the note said, adding that short dollar positioning is now the most sizeable since early 2013.
The April employment report released on Friday showed creation of 160,000 jobs for the economy, with the unemployment rate at 5 percent. This is was much lower than the Thomson Reuters forecast of 202,000. The weakness in the data has led to analysts questioning the timing for the next Fed rate hike.
Goldman Sachs recently trimmed its expectations for Fed hikes, dropping the June hike for next month and removing a March hike from 2017.
"Overall, their hiking profile is therefore 50 basis points less over the next 18 months, though it remains the case that the cumulative tightening they foresee by end-2017 (125 basis points) dwarfs what interest rate futures now price on that horizon (35 basis points)," the bank said.