Dollar Slips in Thin Holiday Markets Despite Strong GDP

EUR/USD – Low Volume and Bearish RSI Divergence Warn of a Pullback

The markets were thin throughout last week, and Forex trading stopped completely on December 25 in celebration of Christmas. Banks across the world were closed on December 25 and 26, and major news centers such as Reuters stopped publishing currency reports on Christmas.

The rest of the week saw the dollar weak against its major peers, as shown by the US Dollar Index (DXY), which opened at 98.66 and closed the week at 98.05. Against the euro, the greenback showed similar weakness, starting the week at 1.1716 and finishing it at 1.1770.

These were not massive moves but a bit surprising, considering that the only notable release, the U.S. GDP, posted better numbers than analysts anticipated. The forecast was 3.3% and the actual reading was 4.3%. Under normal circumstances, this would strengthen the USD.

Economic Calendar Highlights

This week’s trading will be affected by the New Year, with a larger impact than last week, as more countries observe New Year holidays than Christmas.

The only notable event will be the release of the FOMC Meeting Minutes, which will offer details about the latest rate meeting. The last FOMC decision was not unanimous, and it’s likely the Minutes will provide some insight. However, the impact on the markets is uncertain due to thin holiday liquidity. The release is scheduled for Tuesday at 7:00 pm GMT.

On Wednesday and Thursday, banks across the world will be closed in celebration of New Year’s Eve and New Year’s Day.

Technical Outlook – EUR/USD

The pair is still trading above 1.1700, but volume is low, which is normal for this time of the year. The Relative Strength Index (RSI) is trading near its overbought level on a daily chart, which could signal a bearish move. The pair has printed a higher high, but the RSI printed a double top, which is a weak form of bearish divergence, further supporting the possibility of a move south.

The main level to watch is 1.1700 as immediate support, while 1.1900 will act as resistance. Keep in mind that end-of-year trading conditions may bring irregular movement and possibly choppy price action.