It Won’t be Easy for the Dollar to Escape Correction

Simply put, the next few days may provide a more profitable opportunity to join the trend of dollar growth at more attractive levels.
Alexander Kuptsikevich
It won’t be easy for the dollar to escape correction
The single currency lost 1.2%, responding to the softer ECB tone. Following the meeting, the regulator promised not to raise rates in 2019 and to provide another round of lending to banks at low rates, which should put pressure on interest rates in the financial system. With visible contrast with the previous intention to cut stimulus, it pushed the single currency below 1.1180 at some point from levels above 1.1330.
More importantly, as a result of this dynamic, the pair got out of the trading range, where it has been since October last year. The EUR weakness has become the main driver of the dollar index growth, which rose to 97.6 last night, the highest level since May 2017.
However, today the dollar has to pass an important test in the form of labour market statistics publication, and it will not be so easy. After seven trading sessions of growth in a row with the final chord in the form of strengthening by 0.9% over several hours with updating of multi-month highs, market participants are more likely to look for reasons for local profit-taking.
It is also worth noting that Saturday’s speech by the head of the Fed on the topic of normalizing monetary policy is the risk event for the dollar. It is possible that the central banks’ heads will continue to play giveaway, one after another softening the rhetoric to avoid significant strengthening of their respective currencies.
It would not be surprising if the US dollar rolls back to 97 at the USDX index and to 1.13 at EURUSD. Nevertheless, from a fundamental point of view, the American currency strengthening is a logical result of stronger macroeconomic data.

This article was written by FxPro

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