FX Traders Weigh Whether Dollar Drop a Slip or Trend Change

Talking Points:

• The Dollar dove back below the same critical technical level that kept back bulls until the October NFPs

• From the fundamental backdrop, the Greenback stumble comes as Fed Funds boost lift December hike chances to 72%

• Event risk levels out into week's end; so setups on high profile themes (mon pol, risk) should require triggers

See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot.

Both the risk appetite-fueled run of US equities and the drive to 12-year highs for the USDollar flagged this past session. Where the S&P 500 stalled, the currency tumbled. This is more likely the reflection of short-term speculation succumbing to tempered momentum rather than a definitive change in bias. Relative monetary policy is still very much a major FX driver, and the Dollar is widening its advantage - with Lacker and Fischer comments, the Fed Funds futures probability of a December hike advanced from 68% to 72%. As for the risk appetite that the US stock index represents, the preceding run was itself dubious against a backdrop of divergent bearings across various asset types. Heading into the end of the week, decisions to trade with or against these new developments should be weighed against time and liquidity. We discuss this in more detail in today's Trading Video.

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