The downside remains the path of least resistance for the American currency
The US dollar has steadied on Friday while staying around long-term lows following the recent sell-off. Risk sentiment has deteriorated somehow after Pfizer cut the number of doses of a planned coronavirus vaccine it might deliver this year. As a result, the selling pressure surrounding the safe-haven greenback has eased. Of note, the US Food and Drug Administration may approve Pfizer’s coronavirus vaccine as early as next week, which is dollar-positive.
Still, the US currency lacks drivers to stage a robust recovery despite the oversold conditions, as the ongoing pandemic in the United States, weak economic data, and the upcoming fiscal stimulus measures continue to cap demand for USD. As for the data, the key NFP employment report could affect the sentiment surrounding the dollar later today.
It is widely expected that the report will point to a more modest gain in non-farm payrolls (+500k versus +638k in October) following the recent sharp increases as part of recovery from a plunge earlier this year. The unemployment rate is seen edging down to 6.8% from 6.9% while wages are expected to rise just by 0.1%.
The question is how the dollar will react to the report. If the figures disappoint, the downside pressure would intensify and could send the greenback to fresh lows. However, if the report reveals upbeat results, the greenback wouldn’t get much support as strong data will add to the positive risk sentiment. As such, the downside remains the path of least resistance for the American currency.
As for the EURUSD pair, the prices climbed to fresh April 2018 highs in the 1.2175 area yesterday. Despite a local correction, the euro retains a bullish bias, holding steadily above the 1.2100 handle. If the common current retains the upside tone in the short term, the pair could overcome the 1.2200 next barrier in the short term.