Monday FX Wrap: Dollar Steadies as Euro Slips Back, Sterling Holds 1.33
The dollar’s bounce-back week is starting exactly where skeptics expected it to: with a pause.
After its worst week since August, the greenback steadied in Monday’s early trade. EUR/USD slipped from Friday’s 1.1244 close to a low of 1.1183 before recovering to 1.1211 — a classic profit-taking dip after a cent-and-a-half rally. USD/JPY firmed back to 158.26, erasing last week’s drift lower, while sterling did what sterling has done all month: refused to fall. GBP/USD held above 1.33, dipping only to 1.3300 before settling at 1.3326 — its third consecutive session above the figure.
Reading the euro’s dip honestly
After five straight sessions of gains, a 60-pip pullback in EUR/USD is not a trend change — it’s digestion. What matters is where the dip found buyers: 1.1183 sits just above the 1.1160 breakdown level from last week, exactly where dip-buyers should appear if the new short-term uptrend is genuine. The sequence of higher lows that began at 1.1114 remains fully intact. The first real warning for euro bulls would be a close back below 1.1160; until then, the path of least resistance is still higher.
The drivers are well-rehearsed by now: positioning was washed out during the dollar’s surge, Fed officials have softened their tone just enough to revive some probability of a year-end cut, and eurozone data finally produced an upside surprise. None of these are blockbuster catalysts, but together they’re enough to keep the dollar on the defensive.
Sterling remains the tell
While the euro consolidates, the pound keeps making the point for the whole anti-dollar camp. Holding 1.33 for a third session — after breaking out to 1.3371 last week — converts what could have been a one-day squeeze into a credible level shift. The market now prices less than a 20% chance of a Bank of England cut this year, the widest rate advantage in the G10, and the clearest trend in the majors.
If sterling pushes through 1.3371, the August peak at 1.3675 becomes the target, and EUR/GBP’s slide toward 0.84 accelerates. A fall back below 1.3200, conversely, would say the whole move was a squeeze that has now run its course. Everything between those poles is noise.
The week ahead for FX
The calendar is second-tier until Wednesday’s US PMI data, which means flows and positioning will dominate. Watch EUR/USD at 1.1160 below and 1.1270 above — the range that contains the current debate. Watch USD/JPY at 157.70, where last week’s recovery began; a break below reopens the September carry-trade scars. And keep sterling on the top of the board: the pound is currently the cleanest expression of the market’s growing doubt about the dollar.
Disclaimer: This is market commentary, not investment advice. Trading FX, commodities, equities and crypto carries substantial risk of loss.
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