USD Still On The Defensive Yet EURUSD Parity Very Much On The Way

Analysts have been talking about EURUSD reaching parity level meaning 1.00000 price level. But the market is behaving totally otherwise. In the last few weeks, EURUSD has climbed up more than 1000 pips. In this week only EURUSD has climbed up more than 300 pips as US Dollar went on the defensive on poor US economic data that was released this week.

The dollar struggled at three month lows versus the euro early on Friday but encouraging news on the U.S. labor market helped it recover some ground against a host of other currencies.

Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week towards a 15-year low.

But just one good labor market report is not enough to turn around USD.We have to wait for the next few months and see whether US economic data is showing improvement or not. By the way a strong US dollar is not what the MNCs want as this cuts into their profit margin. So there is always competing pressures on the FED whether to raise the interest rate or not. In March FED said it will raise interest rate soon meaning somewhere by June. Market reacted widly. EURUSD jumped up 500 pips in a few hours and then next day gave up 300 pips before it climbed back up and recovered the lost ground. Then it again fell down and analysts starting saying parity level within sight.

EURUSD has climbed back up more than 1000 pips again and is now trading around 1.13772. EURUSD parity level feels way too far below now. But still analysts are talking that it will happen.

The dollar hit a more-than three-month low against a basket of major currencies after U.S. retail sales data missed expectations, helping to support expectations that the U.S. Federal Reserve will hold off on raising rates.

But longer-term, fund managers invested in U.S. markets are still expecting the dollar to return to strength from current levels of around 1.13 against the euro. This would leave euro-dollar parity, or a one-to-one exchange rate, still very much on the cards.