FX snapshot – US Dollar Index, GBP/USD, EUR/USD, USD/CAD

Dollar weakness is the current driver so far this morning, as the yawning gap between now and the next Federal Reserve meeting leaves USD bulls looking friendless.

Euro and US dollar notes
Source: Bloomberg

US Dollar Index starts poorly

The index is pushing below the key $97.00 level, which marked support last week. With November opening on a weak note and no Fed meeting for some time, it will take some impressive jawboning from Fed members to put this market on an upward trajectory. On the hourly chart there is some limited support around $96.68, but a move through there would pose the risk that a swift drop back to $95.12 is in the offing. Dollar bulls have to get the index back to $98.00 to suggest the move down has run its course.

GBP/USD eyes $1.55

Two strong days at the end of last week put GBP/USD back on an upward trajectory, although it still needs to push on and clear the October high at $1.55. This would then clear the way towards $1.5573, and then $1.5651. The surge on Friday brought an end to the steady downtrend that had been in place since 22 October, and with the 50-hour SMA ($1.5340) turning higher we could see this move continue for most of the week. Only a move back below $1.5360 would invalidate the bullish outlook, and even then bears will need to get the currency pair back below $1.5250 to suggest that the downward trend has reasserted itself.

EUR/USD targets 200-day SMA

The euro seems to have found a floor in its post-Draghi slump against the USD at the $1.09 level, close to the area where the August bounce began. Having stabilised in recent sessions we now look to see whether it can push on and move above the 200-day SMA at $1.1110, putting it back above the September support level. A failure to hold these recent gains would lead to another possible test of support at $1.09, with a daily close below here heading to the July low at $1.08 and then on to $1.0520.

USD/CAD could fall through C$1.3050

Rapidly ebbing USD strength has meant that we have seen the mid-October uptrend here give way to fresh downside. Friday's late drop saw the pair break the 28 October low at C$1.31, and while the 23 October support level around C$1.3050 still holds, a break through here would see the pair head towards support around C$1.2950. If the greenback revives it still needs to push through C$1.3175 and then C$1.33 to reverse the emerging downward trend.

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