The week's breakdown: the dollar fell most against the Australian dollar - down 0.76%. Against GBP - 0.67%, against CAD - 0.65%, against CHF - 0.61%, against NZD - 0.60%, against EUR and JPY - 0.53% each.
By pair on Thursday: EUR/USD around 1.1245, GBP/USD consolidating near 1.3400 after a second straight day of gains, USD/JPY below 157.20 - the lowest since early October. Gold (XAU/USD) meanwhile is just below $4,100, down more than 1% on the day.
The reasons: the yield on 10-year US Treasuries dropped below 5.1% (down 0.6% on the day), money flowed into risk, plus overcrowded long dollar positions were being closed out. ING analysts note that the dollar is "trading with a soft undertone" and no longer looks overbought on their short-term valuation estimates, and they expect a gradual rather than sharp weakening.
A separate story - France: the 10-year bond yield rose above 5% for the first time since June 2002 and is holding near 5.05% amid turmoil over spending cuts. This is precisely what is capping the euro's rise.
Technically, EUR/USD is still below its 100-day moving average (around 1.1455), the RSI(14) is around 42, i.e. below the neutral 50. Resistance - 1.1276 (October 6 high), support - 1.1185 (October 19 low).
What's next: today - US weekly jobless claims, the eurozone preliminary consumer confidence and a speech by ECB board member Fabio Panetta. Next week the ECB is expected to leave the rate at 2.5%, while the market is pricing in a Fed rate hike for December.
Were you in on this dollar selloff?
Half a percent on EUR/USD in a week is a move you most likely saw and understood. But on a deposit of a couple thousand, a week like that brings in an amount the size of a dinner. In prop trading, the trading notional is provided by the company: you pay for a test account, pass it according to the rules, and trade the company's volume for a share of the profit. Currency cycles last for months, and it makes more sense to understand the mechanics before the next week like this.