There is still a significant accumulation of long positions in the US dollar, but market sentiment has changed.

The US dollar exchange rate has been relatively stable in the last few sessions. The Federal Reserve's speech has been less explosive, while other major currencies lack positive catalysts. As of the writing of this news during the early European session on Thursday (November 9th), the EUR/USD is observed fluctuating within a new consolidation range near 1.0700.

eur/usd today

The majority of economists currently predict that the US economy will experience a slowdown in the fourth quarter of 2023. This forecast erodes the prospects of further interest rate hikes by the Federal Reserve, simultaneously reducing the attractiveness of the US dollar.

Despite the greenback having recovered from the slump triggered by Jerome Powell's statements last week, this currency remains vulnerable to another bearish wave. There is still a significant accumulation of long positions in the US dollar at present, but market sentiment has shifted from a buying trend to seeking selling opportunities.

"The dollar is vulnerable to weaker data going forward," said Shaun Osborne, chief foreign exchange strategist at Scotiabank in Toronto. "We're transitioning to a sort of sell dollar rallies environment, after the buy dollar dips trend that we've seen really since the middle of the year."

"Essentially it's a period of consolidation for the U.S. dollar generally... That probably will continue for a little bit longer," said Osborne.

Market participants are anticipating two speeches by Powell this week. He did not touch on monetary policy issues in his speech yesterday. However, there is still one more scheduled speech by Powell later tonight.

The Euro, as the strongest rival to the greenback, is powerless to launch a 'counterattack' on its own. Some economic reports from the Eurozone yesterday indicated a persistently sluggish situation. German inflation data remained static in October 2023, while Eurozone retail sales recorded -0.3% (month-over-month) in September 2023.

According to Nick Bennenbroek, an economist at Wells Fargo, the diverse prospects for consumer spending and investment suggest that the Eurozone is very close to a recession.