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Strong economic data boosts US dollar

Greenback advances against most major currencies on a slew of economic reports, but key EUR/USD pair managing to hold on to key support levels.

A slew of economic reports out of the US on Wednesday pushed the greenback higher but given the quite strong and some cases unexpected nature of the data the US dollar rise was surprisingly lackluster. In early New York trade the US currency failed to break through key technical resistance levels against the euro.

The modest response may be due to trading activity in the US is slowing down dramatically around the important Thanksgiving holiday which is the third Thursday in November, tomorrow, when US financial markets will be shuttered. The Friday following Thanksgiving is typically moribund as well.

Key data

The most important report Wednesday was October durable goods orders, which showed the strongest advance since the start of year, and previous months were revised upwards. US consumer spending – which accounts for two-thirds of GDP - rose 0.03% last month in line with expectations, but US third quarter GDP advanced by a revised 2.1%, up from 1.9% previously estimated.

But despite this very strong data for the US economy, which underpins the no-recession imminent view that has become the market consensus in recent weeks, the US dollar made only a weak attempt to break through key resistance against the euro.

Fails to break

EUR/USD is still trading in the $1.12 to $1.10 band it has since early October, but in late morning New York trade was at the very bottom of that band changing hands around $1.10.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.

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