Further Dollar Support Needs Economic Proof

The strength of the dollar took a dramatic reversal during the night with the EURUSD rebounding from a low of 1.4260 to its present reading of 1.4430 (see hourly chart). A consensus of expert opinion seems to be behind this development, advising caution concerning further dollar support in the wake of major US fundamental data releases due this week.

The surprisingly positive November Non-Farm Payroll figure generated optimism about the prospects of a US recovery, resulting in support for the dollar throughout December. Expert opinion is now stating that “further key data will have to confirm the market view that the U.S. economy is experiencing a sustainable recovery".

The EURUSD was also supported by the Euro-Zone PMI Manufacturing reading that was posted this morning showing a climb to 51.6 from 51.2. This result registered the fastest increase in 21 months.

Good UK data was also released that registered a climb in Mortgage approvals for November at 60,518 against an expected 58,000. The GBPUSD rallied to highs of 1.6240 before retreating to its present value of 1.6170.

There is an event risk at 10.00am EST today when the US Institute for Supply Management's December manufacturing index will be posted. A reading of 54.1 is expected compared to 53.6 last month.