USDIndex & EURUSD: An Update

US Dollar Prospect

The US Dollar has in recent weeks shown some downside risks. There is no clear catalyst yet to drive positive sentiment; if the market senses that more liquidity is on the Fed menu, the currency may naturally take a hit.There are also external factors to consider, for example the Brexit deal which could potentially push the Pound and Euro higher, at the expense of the Dollar. However, although the risk would increase, none of this would change the situation either. Unless the US carries out a full national lockdown when Biden takes over in January, it’s hard to imagine any of these will actually sink the Dollar, especially considering the ECB has been holding on to the $1.2000 level on EURUSD of late. Whenever EURUSD rises towards $1.2000, the central bank is likely to start commenting.
Hence, while the Dollar may feel a little hot and volatile, the downside looks somewhat limited. As you can see on the USDIndex chart, this week’s prices are quite flat, and there hasn’t been any significant movement yet. The candle is still on the side of the lower band, 26 EMA is holding back the attempted rally, and AO is still on the negative side. However, this downside movement is indeed quite limited, as the market seems to be entering a consolidating and potentially choppy phase.

Ady Phangestu

Analyst – HF Indonesia

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