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The dollar opened cautiously this week as traders assessed the odds of US rate cuts reaching the 25-point rate cut recent economic events have been hinting towards.
On the Asian end of the market, the yen strengthened on expectations of rising domestic rates, and the euro slowed against the tide of political instability in France.
Despite uncertainties across the pond, the dollar index saw a modest upward movement, gaining 0.27% during the trading session.
Picture: The USDX closed at 106.236, with resistance at 106.30 and support near 105.80, as seen on the VT Markets app.
This reflects stable market conditions and cautious optimism, with no major volatility on the day.
A break above 106.30 would suggest further upside potential for the dollar, while a failure to hold above 106.00 could see a retracement towards the support zone near 105.80.
Market participants will be looking at an exciting week to come, with US economic reports and Fed commentary just around the bend.
Traders are holding their breath as Fed policymakers are set to speak this week. The November payrolls forecast of 195,000 new jobs is set to bolster expectations for a 25-basis-point cut on December 18.
See also: Week Ahead: Fed Policy Faces December Labour Test
Bank of Japan Governor Kazuo Ueda’s hawkish comments on interest rate hikes, coupled with Tokyo’s October inflation uptick, have led traders to imply a 56% probability of a quarter-point rate hike at the BOJ’s December 18–19 meeting.
In Europe, traders are eyeing the European Central Bank’s upcoming meeting, where a 27% chance of a 50-basis-point rate cut is priced in.
Political risks are adding to euro volatility as France faces potential government collapse over no-confidence votes.
Widening French budget deficits have driven spreads between French and German bond yields to their highest levels since 2012, raising concerns over eurozone stability.
While U.S. labour data holds significant influence over the Fed’s trajectory, euro traders are wary of political turbulence and its potential economic fallout.
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