The dollar strength took a pause in Monday’s session ahead of key economic data. It is expected that the Institute of Supply Management services PMI is going to show services slowing last month and potentially heading to a four-month low at 54 versus 54.4 in the previous month. Although, a reading above 50 still indicates expansion is still going on.
“We’re going to have a little bit of a pause in dollar strength,” said Chis Weston, chef market strategist at IG Ltd, on a rehashing of Federal Reserve taper talks.
On November 7, a report is expected to show a slowing rate of growth for the US in the third quarter, two percent down from 2.5 percent in the previous quarter.
Major peers rose against the dollar in Sunday and Monday’s trading session. The eurodollar rebounded after losing 1.2 percent last week in expectations of a rate cute by the European Central Bank (ECB), while the on-again, off-again Australian dollar increased .8 percent yesterday. Tonight, the Reserve Bank of Australia will release their monetary statement and benchmark rate decision, which is supposed to remain level.
The dollar has risen .7 percent over the last weak, while the safe-haven yen also rose .2 percent in the same time.
The daily charts showed price action bouncing off a supply zone after a strong rally from the recent low of 79.06. Price action is currently resting on the 50 EMA, while the 20 EMA is showing an encouraging sign as it is beginning to slop upwards. Near-term support is 80.3, while positive data could push action through the supply zone. If so, potential upside to the 200 EMA at 81.34 is likely with additional potential to 81.68.
The European Central Bank’s rate decision is likely to overshadow any crumby data out of the United States. The eurozone has taking a few steps back as the German economy is showing signs of slowing down. A rate cut would be bad for the euro, and it could push the dollar higher.