DXY rebounded from the short-term support area of 105.50 after the dip following the release of the FOMC Minutes. The bounce is more of a technical one as EURUSD formed a double top at the 1.0450 zone and GBPUSD pulled back, following the failed breakout of the 1.21 level:

Investors brace for hawkish household consumption figures in November as US retailers offer aggressive discounts including a ‘Cyber Five” promotional campaign. Consequently, the market may show less sensitivity to positive consumption figures and react more significantly if data disappoints. Given the high US employment, low unemployment and relatively low gas prices (-27% from June's peak), risks are skewed to positive surprises in the data.

Among the monetary decisions of global central banks, it is worth noting rate hikes from the Central Bank of Sweden and South Africa by 75 bp. And from the Central Bank of Turkey by 150 bp. This may be reflected in a lowered dollar demand due to the narrowed yield differentials.

Returning to the dollar, the US currency index flirted with 200-SMA yesterday, but failed to test the line:

In addition, the correction from this year's highs is approaching 50%, which increases the chances of a massive rebound. The 105 level on the dollar index may be a good level for medium-term purchases.

Surveys of firms in Germany and France showed slightly less pessimism than expected. In addition, markets were pleased with the final Germany GDP estimate as the figure was revised upward to 1.3%. Despite signs of a recession in the Eurozone, a number of ECB officials this week suggested that it might be premature to ease the pace of rate hikes. The market is pricing in a 61 bp tightening in December. EURUSD will remain sensitive to rate expectations, however, in the short term, a breakout of 1.05 for the pair looks unlikely. Given that the dollar is near important support levels, a test of 1.05 could be a good opportunity to short the pair.