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Market Watch: Euro Multi-Month Highs Against Weakening US Dollar

Euro Highs Weakening US Dollar

Euro hits multi-month highs against weakening US dollar ahead of essential data release; positive outlook continues.

In a notable move, the Euro (EUR) has surged to fresh multi-month highs against the weakening US dollar, marking levels last witnessed over four months ago. This week, the single currency has demonstrated strength across various pairs as market participants scale back expectations for elevated rate cuts. Meanwhile, the US dollar is on a downward trajectory, with the US dollar index revisiting levels last observed at the close of July. Adding to the pressure, US Treasury yields are approaching multi-month lows as traders anticipate a series of rate cuts by the Federal Reserve in the coming year, per the latest CME predictions, projecting 25 basis points cut at seven Federal Open Market Committee (FOMC) meetings in 2024.

Market Watch: Euro Multi-Month Highs Against Weakening US Dollar

As the markets prepare to wind down for the festive break, the spotlight falls on the November US core Personal Consumption Expenditures (PCE) data scheduled for release later today. This data represents the final heavyweight event of the year. Projections anticipate a decrease in the year-on-year Core PCE from 3.5% to 3.3%, and any reading below expectations may further weaken the US dollar.

The EUR/USD pair maintains a positive outlook and could test the 1.1075-1.1095 range as markets resume regular activity at the beginning of the new year. Technical indicators indicate support, with all three simple moving averages favoring an upward trend. While the Commodity Channel Index (CCI) suggests the pair is overbought, the reading has not yet reached extreme levels. The continuation of the recent multi-week pattern of higher lows and higher highs appears likely.

According to IG retail trader data, 34.53% of traders are currently net-long, with the short-to-long ratio at 1.90 to 1. The net-long traders have decreased by 16.38% from yesterday and 0.80% from last week. In contrast, the number of traders net-short has increased by 18.51% from yesterday and 10.53% from last week.

Regarding client positioning, data reveals a decrease in net longs by 14% daily, accompanied by a 5% increase in shorts and a 2% decrease in open interest. Weekly, longs have decreased by 7%, shorts have increased by 9%, and open interest has seen a 3% uptick.

As the market eagerly awaits the US core PCE data, the Euro’s upward momentum and the US dollar’s continued weakness could shape the currency landscape in the final days 2023.

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