USD Rally Stalls; EUR/USD Holds Firm Above 1.0500

The U.S. Dollar's recent rally has hit a pause, with the EUR/USD pair trading sideways just above the 1.0550 intraday support level. The Dollar Index hovers around the 106.50 support, searching for fresh catalysts to resume its upward momentum. Markets appear to be in a holding pattern, having already priced in significant risks and implications of expected Trump administration policies—particularly around US protectionism, tariffs, and trade deals. Investors now await further clarity to either validate these expectations or expose them as an overreaction to Trump’s reelection.
On the one hand, there are signals urging markets not to rush to conclusions and to wait for actual actions. For example, Fed officials are exercising caution in projecting the implications of President Trump's policies on monetary strategy for the upcoming December meeting and into 2025. Fed Chair Jerome Powell emphasized the premature nature of making policy judgments at a recent Dallas event, noting, "It's too early to reach conclusions."
On the other hand, there is information fueling those concerns, suggesting that the risks priced in by the market are, on the whole, justified. For instance, Stephen Moore a senior economic advisor to President Trump, hinted at potential escalation of trade tensions between the Eurozone and the United States. Moore indicated that the US might deprioritize a free trade deal with Britain if it favors EU relations over American ties.
The EUR/USD pair is currently trading within a narrow range of 1.05 to 1.06, reflecting a market in a holding pattern. Last Friday's attempt to rebound faced strong resistance around the 1.06 level, resulting in a daily candlestick that closed near its opening price, indicating the market's reluctance to move higher. Today, upward pressure is building again. Given that a bearish breakout would require significant triggers, which are not anticipated this week, the market may be inclined to engage in a technical upward correction targeting the 1.0650 area:

The British Pound is edging higher, attempting to claw back losses from Friday's sharp sell-off triggered by dismal economic data. The UK's economy unexpectedly contracted by 0.1% in September, with minimal growth in the third quarter. This unexpected downturn could prompt the Bank of England to consider more aggressive rate cuts to stimulate growth. Such a policy pivot could significantly impact interest rate differentials and, consequently, GBP valuations against its peers.
From a technical analysis perspective, GBP/USD is trading near a key ascending support line, which intersects with the horizontal level at 1.26. Technical buy signals seem sufficient; however, the market is waiting for signs of a broader dollar pullback to increase long positions on the pair. Overall, the risks are tilted to the upside, and short-term downward movements are highly likely to be met with active buying:

The Canadian Dollar remains on the back foot as market participants anticipate a 50 basis point rate cut from the Bank of Canada in December. Investors are closely watching the upcoming Canadian CPI data, expected to show a month-on-month increase of 0.3% in October after a 0.4% deflation in September. A year-on-year inflation uptick to 1.9% from 1.6% could influence the BoC's policy trajectory, forcing the central bank to slow down the pace of rate cuts or issue less dovish guidance.
The next significant move for the Australian Dollar is likely to be influenced by the release of the RBA minutes from its November 5 meeting. The RBA held its Official Cash Rate steady at 4.35%, with Governor Michelle Bullock delivering a hawkish outlook amid concerns over upside risks to inflationary pressures. The minutes could provide deeper insights into the central bank's thinking, affecting interest rate expectations and currency valuations.
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