The US Dollar (USD) is ending the week on a strong note. The DXY raced to a new, two-year high overnight in response to weak European data but has conceded a lot of those gains ahead of North American trading, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
“With the US Thanksgiving break coming up next week, some additional squaring up of USD longs would not surprise. But short-term losses in the USD broadly should not be confused with the USD plateauing. In contrast to Europe especially, US macro-economic data reports remain relatively firm—there has been no downturn in the positive run in the US data surprise index—and market expectations for Fed easing continue to get reined back whereas European policy easing bets have picked up.”
“Minor USD dips in the next few days are likely to remain well-supported, I believe and the USD is likely to remain firm into the FOMC decision on December 18th at least. The DXY’s push (and, so far, hold) above 107.35, the high reached last September is significant. The low 107 are is important technical resistance because last year’s high effectively represented a test (and rejection) of the 50% retracement (107.2) of the 2022/23 drop in the index.”
“A sustained push through the low 107 zone signifies a bullish break out of the sideways range the index has held since late 2002 and sets the index up for deeper retracement/ rebound towards 109/111 in Q1 and ultimately perhaps a retest of the 2022 peak in the index at 114.78.”
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