After the opening gap lower yesterday, the pair showed much resilience in bouncing back above parity but is slightly lower on the day as the dollar is a little higher across the board. The gains for the dollar today aren't anything to shout about, though perhaps it is the technicals that are the more important focus this week.
We have the US midterms as well as the all-important CPI data on Thursday, so those will play into broader market sentiment before the week is over.
As for the central bank playbook, the ECB is still maintaining its tightening path but has toned down its aggressiveness while the Fed has ensured that it is still keeping a rather unyielding resolve for the most part. On the balance of things, that favours the dollar slightly even as markets have largely priced in the rate hikes at this point.
So, what is the technical picture saying?
Looking at the chart above, the 100-day moving average (red line) is the key line in the sand right now at 1.0040. That is helping to keep a ceiling on any upside move as sellers continue to look for some incentive to keep the downside momentum going.
The September lows just below 0.9600 is the key support region to be mindful about, so essentially we are seeing price action caught in between that and the 100-day moving average for now. Eventually, the pressure valve in between the two key levels will break and the trade will be to go with the flow on that.
