US Dollar Drops to 5-Month Low
The greenback declined against all of its major counterparts with the dollar index (DXY) hitting lows not seen since the summer. DXY broke below major support that held it higher on several attempts in August and October.
Progress towards a resolution in two issues provided the catalyst for the dollar move. First, UK PM Johnson won his Conservative majority, taking UK one step closer to an EU exit. Second, US President Trump has agreed to remove some of the tariffs that were scheduled for December 15. The phase one deal is not finalized, but coming into the second half of the week, the news gave what the markets needed for a return of risk appetite.
Later in the session today, the latest retail sales figures will be released from the United States. The figures are expected to continue to rebound after a poor reading in October. The data release might cause some volatility in the markets, although yesterday’s events have set the tone for the markets.
EUR/USD has broken to a 4-Month high but is running into a bit of resistance at this stage.
The 50-week moving average has come into play. The indicator currently resides at 1.1195 and has been tested in the early day. There is further resistance from the top created in the second half of October. The pair popped above it but has not made a clear technical break at this stage.
I suspect EUR/USD will continue to remain bid on dips as traders caught on the wrong side of the markets will look to cover. There is strong upward momentum in play and a reversal appears unlikely in the absence of a catalyst. For the session ahead, I see support at 1.1149.
To the upside, the next resistance level comes in at 1.1217. This level has been significant on a daily chart since last year.
- EUR/USD has rallied to a 4-month high on the back of broad-based dollar weakness.
- There is a confluence of support in play, although the broader momentum remains to the upside. Dips are like to be bought considering this momentum.
This article was originally posted on FX Empire
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