The U.S.
Dollar index gained 0.5% since the beginning of the week. The EURUSD has
reached a technical target at 1.08000 to remove completely technical overbought
tension. This opened a path for the dollar to weaken further towards
1.12000-1.13000 against the Euro.
However,
such a strong correction of 1.9% may result in further strengthening of the Dollar.
Such scenarios may lead the EURUSD to 1.05000-1.06000 very rapidly. This
scenario could become a reality if the pair fails to recover above 1.08800 by
the end of Tuesday. But, this scenario is against a Christmas stock rally,
which is traditionally accompanied by a weakening Dollar. The rally became
possible after a lower-than-expected October PCE Price Index. Large investors
are also expecting the Dollar to deteriorate. They were leaving the ETF
WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) that is designed to
benefit from the strengthening Greenback.
The EURUSD closed
last week at 1.08800, which is 0.5% up for the Greenback. If the strengthening
of the Dollar continues this could be a cold shower for these investors. So,
they will likely stop this from happening.
Nonfarm
Payrolls is the major event of the week that will happen on Friday. It would be
unwise to bet on large movements before the publication. Moreover, strong
movements of the Dollar if unlikely to happen before the Federal Reserve’s
(Fed) meeting on December 12-13. Some exclusions could happen, but market are
likely to stand steady before the meeting without any major movements.
So, even a closing
of the EURUSD below 1.08800 would not be enough for the pair to plummet to
1.05000-1.06000. Finally, we may have the currency market steady before Friday.
Any further developments will largely depend from the actual readings of the
labour market data compared to the Wall Street expectations.
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