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US Data Better than Expected, DXY Making a Delayed Bounce

Manufacturing PMI for November released earlier showed that activity increased to 52.2 vs and expectation of 51.5 and 52.3 last.  A reading of 50 or greater shows economic expansion, while a reading of below 50 shows economic contraction.  In addition, consumer sentiment was better than expected.  The Michigan Consumer Sentiment for November was 96.8 vs and expectation of 95.7 and 95.5 previously.  This is the highest reading since July.  The US consumer seems to be quite content at the moment with stocks near all time highs!  Stocks and US Dollar pair were unchanged upon the release.

However currently, DXY is trying to stage a late week rally, after an obnoxiously unchanged week.  On a 240-minute chart, the DXY appears to be making a charge above support and trying to retest the 50% retracement level from the highs on October 1st to the lows on October 18th, at 98.38.  If price pushes through there, the target of the inverted head and shoulders pattern and the 61.8% Fibonacci retracement level of the previously mentioned timeframe comes into place near 98.68.

Source:  Tradingview, City Index

As one may expect, as the US Dollar index is headed higher, the EUR/USD is pulling back.  The Euro makes up almost two-thirds of the DXY.  If EUR/USD can break trough some horizontal support at 1.1030, the 1.1000 is in sight, and so is a confluence of Fibonacci retracement levels near 1.0990 (as well as prior lows).  This should prove a tough support area to crack, however if it does, the target for the double top is near 1.0965.

Source:  Tradingview, City Index

One thing is certain though after watching the price action this week.  Volatility has been extremely low.  There needs to be a catalyst to really get these markets moving again. Whether it be Brexit or a US-China trade deal, something needs to happen in order to get the volatility back in the US Dollar currency pairs.


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