The Dollar is Steady Ahead of the Nonfarm Payrolls

The U.S. Dollar index gained 0.5% since the beginning of the week. The EURUSD has reached a technical target at 1.08000 to remove completely technical overbought tension. This opened a path for the dollar to weaken further towards 1.12000-1.13000 against the Euro.

However, such a strong correction of 1.9% may result in further strengthening of the Dollar. Such scenarios may lead the EURUSD to 1.05000-1.06000 very rapidly. This scenario could become a reality if the pair fails to recover above 1.08800 by the end of Tuesday. But, this scenario is against a Christmas stock rally, which is traditionally accompanied by a weakening Dollar. The rally became possible after a lower-than-expected October PCE Price Index. Large investors are also expecting the Dollar to deteriorate. They were leaving the ETF WisdomTree Bloomberg U.S. Dollar Bullish Fund (USDU) that is designed to benefit from the strengthening Greenback.

The EURUSD closed last week at 1.08800, which is 0.5% up for the Greenback. If the strengthening of the Dollar continues this could be a cold shower for these investors. So, they will likely stop this from happening.

Nonfarm Payrolls is the major event of the week that will happen on Friday. It would be unwise to bet on large movements before the publication. Moreover, strong movements of the Dollar if unlikely to happen before the Federal Reserve’s (Fed) meeting on December 12-13. Some exclusions could happen, but market are likely to stand steady before the meeting without any major movements.

So, even a closing of the EURUSD below 1.08800 would not be enough for the pair to plummet to 1.05000-1.06000. Finally, we may have the currency market steady before Friday. Any further developments will largely depend from the actual readings of the labour market data compared to the Wall Street expectations.