USD in a dovish fatigue, EUR gives up 1.10, and markets look to Powell USD in a dovish fatigue, EUR gives up 1.10, and markets look to Powell USD in a dovish fatigue, EUR gives up 1.10, and markets look to Powell

USD in a dovish fatigue, EUR gives up 1.10, and markets look to Powell

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  US October PCE data had dovish hints, but market did not extend the dovish momentum on the release suggesting signs of a fatigue. Any hawkish hints in Powell’s speech today could mean further USD gains even as a broad bearish picture remains intact. EURUSD however reversed from 1.10 on softer Eurozone CPI and downside pressures could escalate as ECB dovish repricing takes hold. Key EUR crosses to consider could be EURGBP, EURSEK or EURNZD.

Key points:

  • DXY staring at a third straight week down
  • Cooling in US PCE however did not spark dovish market reaction
  • Dollar could consolidate before resuming its bearish trend, Powell key ahead
  • EURUSD gave up 1.10 on softer Eurozone CPI
  • ECB rate cuts in H1 could keep it harder to justify EURUSD towards 1.10
  • EUR has room to weaken on the crosses


USD: Roller-coaster week

The US dollar has been on a roller-coaster this week. DXY index extended its decline of the last two weeks to break below the 103 handle earlier in the week on the back of dovish Waller and a technical break lower in 10-year Treasury yields, but recovered into the end of the week as month-end flows and relatively less hawkish Fed speakers took centre stage.

October PCE data released yesterday was full of dovish tilts. Personal income and spending slowed sharply to 0.2% MoM each, from 0.4% and 0.7% respectively in September. PCE deflator came in below expectations on the headline and matched expectations on the core, with core PCE now at 3.5%, below the projection of 3.7% in Fed’s September SEP. This showed the inflation is coming down faster than Fed thought it could, at least on a cyclical basis.

However, the market seems to have fatigued on the dovish tilt, and Treasury yields and dollar rose in the session.

Focus now shifts to Chair Powell, who speaks at a fireside chat today. After a steep dovish turn from Fed Governor Waller in the week and tempering hawkish bents by other Fed members, it may be difficult for Chair Powell to come in extremely hawkish. However, with dovish fatigue, marginal hawkishness could also be relevant, especially given that markets are already pricing in more than 50% odds of a rate cut in Q1. Saxo’s momentum tracker, as shown in the chart below, shows USD momentum turning positive in the last two days.

Market Takeaway: Bearish dollar picture is still intact but intermittent support remains likely. A move above 200DMA at 103.60 in DXY index could reverse the current downtrend temporarily.

EUR: Moves to 1.10 could remain a sell

Eurozone November CPI cooled more than expected, with the headline coming in at 2.4% YoY, significantly below last month’s 2.9% and getting in close sight of the ECB’s 2% target. Core also cooled from 4.2% YoY in September to 3.6% in October, coming in below 3.9% expected. Market pricing for the ECB also shifted dovish, with the first full rate cut now priced for April compared to June at the start of the week before the regional inflation prints were reported. For comparison, the first full rate cut for Fed is priced in for May as of today.

EURUSD came back to test the 1.09 handle from highs of 1.1017 earlier in the week. Support at 1.0865 held up for now. However, with inflation cooling and PMIs indicating a contraction, it will remain hard to justify further EUR strength.

Market Takeaway: A close below 1.0865 support this week could put the focus on the downside for EUR and any moves towards 1.10 could remain a sell. Move in EURGBP back above 0.865 also likely to be prone to reversals. EURSEK also has room to move towards the 11 handle and EURJPY could move below 160 as also suggested by trade signals. EURNZD is testing 50DMA and break below could accelerate the move to the downside.

Source: Bloomberg, Saxo

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.