Dollar Bid Returns: EUR/USD Cracks 1.15, Sterling Slides
The correction is over. The question now is whether something worse is starting.
EUR/USD closed Tuesday at 1.1480, decisively below 1.15 for the first time since early August. GBP/USD fell to 1.3389, down from 1.3501 just days ago. USD/JPY rebounded to 157.05, completing its round trip from the Monday panic low of 152.90. The dollar is rising against everything, and rising fast.
What flipped the switch
A batch of firmer-than-expected US data this week revived the rate-gap argument that drove the dollar all spring. Add in the unwinding of summer dollar shorts — speculative positioning data showed the most bearish dollar stance of the year just two weeks ago — and you have the ingredients for a proper squeeze. When everyone’s short and the data surprises, the exit is narrow.
The euro’s break of 1.15 is technically significant. That level had held four separate times since August 5, and each successful defense drew more buyers. Its failure now turns all those buyers into trapped longs, and trapped longs sell rallies.
How far could the squeeze run?
First target: 1.1456, the September 10 low. Below that, 1.1400, then the June lows near 1.1325. On the topside, the broken 1.15 level becomes resistance — rallies back toward it should find sellers.
Sterling’s breakdown adds breadth confirmation. The pound’s slide through 1.34 signals this is a dollar move, not a European one. The August dollar correction, it turns out, was exactly that — a correction. The spring uptrend has reasserted itself.
Disclaimer: This is market commentary, not investment advice. FX trading carries substantial risk of loss.
Leave a Reply