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USD Attempts to Fight the Correction - Levels in EUR/USD, USD/JPY

USD Attempts to Fight the Correction - Levels in EUR/USD, USD/JPY

Christopher Vecchio, CFA, Senior Strategist

Talking Points:

- Technical evidence of USD attempting to fight correction.

- Bulls in control if EURUSD sub-1.2615, USDJPY above 107.50.

- Euro Faces Economic Headwinds with Weakening German, Euro-Zone PMIs

The US Dollar may be facing new fundamental headwinds after last week's FOMC minutes revealed that the Fed is concerned about the greenback's recent appreciation. Nevertheless, with the broader USDOLLAR Index holding last week's low, continuation in the correction has been hard to come by. Now there may be scant evidence emerging of the US Dollar trying to fight back.

Sparked by rumors that the ECB may begin buying corporate bonds as early as December, EURUSD's slump to fresh daily lows will only truly gain interest to the short side if it were to breach $1.2715.

USDJPY's comeback has been a bit more tentative with US yields having fallen off quite a bit, but the broad rally in US equity markets has lifted the once-quintessential carry pair. Whereas the S&P 500 needs to regain 1923/25 by week's end, it would serve USDJPY well if the pair were to achieve ¥107.50 by Friday.

See the above video for technical considerations in all of the USD majors.

Read more: Be Selective in EUR Exposure, Pockets of Strength Found

--- Written by Christopher Vecchio, Currency Strategist

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.