The US dollar continues to strengthen. Since the beginning of the week, the Dollar Index has gained just over 1.5%. However, the momentum behind this move deserves attention. From the lows at the end of September, the Dollar Index has risen almost 7%, taking it straight from the bottom of the trading range of the last two years to the top. Now, all eyes are on whether the bullish move will continue at the key resistance level of the last two years. The next move will be decisive.
The main driver of the dollar rally has been the dramatic change in the US political landscape, first anticipated and then confirmed in early November. Expectations of higher tariffs on US imports are strengthening the dollar, as is speculation about tax cuts and deregulation. At the same time, the latter is supporting equity indices, although they are finding it increasingly difficult to rise in an environment of a strengthening local currency.
The British Pound fell below 1.2700, hitting lows not seen since early August. In the process, it fell below its 200-day moving average. More importantly, it fell below the 50- and 200-week moving averages. Over the past 10 years, there have been six dips below this curve with an average momentum decline of 14%. On the technical side, the path to 1.2000 is now open despite the accumulated oversold condition. Whether the Pound will go all the way depends on the balance of power in the UK and US economies and the actions of the central banks.
In the short term, there is little hope for the Pound against a backdrop of rising unemployment and slowing wage growth. In both cases, we are talking about normalisation, not collapse. It will, however, allow the Bank of England to accelerate interest rate cuts.
The single currency has been actively sold off since the US election, as expectations of new tariff wars coincided with the collapse of the German coalition and floods in Spain, not to mention ongoing concerns about the region's industrial sector. As a result, EURUSD fell below 1.0550. This is the lower boundary of the trading range since the beginning of the year.
Historically, the 1.05 area has been a turning point for EURUSD. A failure below this level paved the way for a rapid decline below parity. In 2022, the decline stopped at 0.95. In 2000, the collapse of the then-new single currency was halted by ECB intervention on dips below 0.85.
Trade Responsibly. CFDs and Spread Betting are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.37% of retail investor accounts lose money when trading CFDs and Spread Betting with this provider. The Analysts' opinions are for informational purposes only and should not be considered as a recommendation or trading advice.
Recommended Content
Editors’ Picks
EUR/USD struggles near 1.0550 amid dour mood
EUR/USD struggles near 1.0550 in the European morning on Thursday. The pair faces headwinds from risk-off flows due to rising geopolitical conflict between Russia and Ukraine and worries over the potential US tariffs on the EU. ECB- and Fedspeak are awaited.
GBP/USD trades around 1.2650, upside potential seems limited
GBP/USD keeps its range near 1.2650 in early European trading on Thursday. The pair's sidetrend could be attributed to the softer US Dollar and a risk-aversion market environment. Traders stay cautious amid rife geopolitical tensions and a light economic calendar. Fedspeak eyed.
Gold price retains its bullish bias near one-week high amid rising geopolitical risks
Gold price maintains its bid tone heading into the European session and currently trades around the $2,660 level, or a one-and-half-week high touched earlier this Thursday. This marks the fourth straight day of a positive move and is sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war.
Shiba Inu holders withdraw 1.67 trillion SHIB tokens from exchange
Shiba Inu (SHIB) trades slightly higher, around $0.000024, on Thursday after declining more than 5% the previous week. SHIB’s on-chain metrics project a bullish outlook as holders accumulate recent dips, and dormant wallets are on the move, all pointing to a recovery in the cards.
Why Nvidia’s story is far from over
Nvidia delivers another earnings beat: Nvidia exceeded expectations with $35.08 billion in revenue, a 94% year-over-year increase, driven by strong performance in its data center business, which more than doubled to $30.8 billion.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.