The constructive outlook in the medium term keeps buoyed by the start of the tapering process
The dollar looks mixed on Wednesday, struggling for direction ahead of fresh economic data out of the United States. Yesterday, the official reports showed that U.S. consumer confidence rose this month due to improving labor market prospects while new home sales jumped 14.0% to 800,000 units in September. Now, market focus shifts to durable goods orders, trade balance figures, and wholesale inventories data.
The USD index is now back below the 94.00 figure but refrains from deeper losses as risk-off sentiment dominates global financial markets. In the near term, the greenback could struggle to regain a robust upside impetus, especially as traders are getting more cautious ahead of the ECB policy meeting due on Thursday. However, the constructive outlook in the medium term keeps buoyed by the start of the tapering process as soon as in November (or December). In this context, the Federal Reserve meeting due next week will be in the market focus.
Against the backdrop of less upbeat risk sentiment, the safe-haven yen demand reemerged on Wednesday, pushing the USDJPY pair below the 114.00 figure. The prices extended the downside correction to the 113.50 region, with the focus now shifting to 113.40. A break below this zone would pave the way towards mid-October lows in the 113.20-113.00 area.
Meanwhile, the euro has been trending lower for the third session in a row today. The pair is now back below the 20-DMA to settle just under the 1.1600 figure during the European hours. Should the ECB express a dovish and cautious tone on Thursday, the selling pressure surrounding the common currency will intensify. In this scenario, EURUSD could retarget the recent lows around 1.1525 if the 1.1570 intermediate support gives up.