View of the Week-Dollar faces seasonal headwinds
Nov 19 (Reuters) -Over the last two years, the dollar has been largely rangebound, something that has not changed even since the so-called Trump trade catapulted the currency higher against its major counterparts following the U.S. election.
However, the greenback did stop short of taking out the two-year range high at 107.34. While the election outcome is clearly dollar-positive, particularly against the euro, the greenback is set to contend with unfavorable seasonal conditions.
Using data since 2000, on average the dollar has been bearish from late November into year-end.
Of course, seasonality is not the sole determinant of the direction a currency, so such studies should not be used in isolation. Instead, seasonality can be a complementary tool for traders.
With EUR/USD holding 1.05, which was likely the initial target for many on the back of a Republican sweep, profit taking of euro shorts can lend itself to prompt a pullback in the USD.
That said, while in the short-run, the dollar is perhaps exposed to a cleansing of positioning, the longer-term outlook remains supportive and thus USD selling can offer bulls better levels to buy back.
For more click on FXBUZ
USD seasonality vs 2024 https://tmsnrt.rs/4fvJRNv
(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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