Dollar Pulls Back as Oil Dives 6% — and EUR/USD Climbs Despite Weak German Retail Sales

A strong factory print that could not save the dollar

The United States dollar pulled back on Monday, November 2, even though the day's main economic release beat expectations. The ISM Manufacturing PMI improved from 54.5 in September to 55.5 in October, against a forecast of 54.6 — a reading above 50 signals expansion, and a beat like that would normally support the currency. It did not, because a bigger force overrode it: oil prices dived about 6% after Iran's Supreme Leader authorized the government to negotiate a peace deal, reducing demand for safe-haven assets and pulling the dollar down with it. The US Dollar Index was trying to settle below support at 101.50–101.65; a break below 101.50 would open the way toward 100.70–100.85. Earlier in the day the index had been down 0.3% to 101.63, having touched its lowest in a month, and the euro rose as investors braced for a packed week dominated by the US midterm elections and central bank decisions in Britain, Australia, Norway and Sweden. The lesson of the session is a useful one for newer traders: a single good data point does not set the trend when a geopolitical driver is moving everything at once.

EUR/USD: gains traders did not expect

EUR/USD gained ground on Monday even as Germany's retail sales disappointed badly, falling 2.0% month-over-month in September against a consensus of just +0.4%. Traders simply ignored the release and focused on falling oil instead. The pair traded around 1.1182 in the November 2 snapshot, with the euro later gaining 0.24% to $1.1187 in the New York 5 p.m. data — its highest 5 p.m. rate since Friday, October 23. The technical map for the pair is tight: if EUR/USD settles above 1.1225, the next resistance sits at 1.1250–1.1265; on the downside, a test of support at 1.1175–1.1190 would open the way to 1.1100–1.1115. A weekly outlook put support lower still at 1.1048, with resistance at 1.1223, and warned that crowded short positioning could trigger a sharp recovery if buyers defend support. Other pairs moved with the same driver: GBP/USD traded near 1.3394, USD/JPY around 157.73, and sterling held relatively firm around 1.3397 ahead of the Bank of England's interest-rate decision on Thursday, November 5.

The euro's problem has not gone away

Monday's gain should not be mistaken for a euro recovery, because the pressure on the single currency is structural, not technical. Fitch revised France's sovereign credit outlook from stable to negative on Friday evening, citing weaker economic growth, higher borrowing costs and difficulties reducing public debt — and the euro traded near $1.1186 early Monday, close to a 17-month low. France's economy contracted by 0.1% in the third quarter, even as the wider eurozone expanded by 0.4%, beating expectations of 0.2%. That divergence is the euro's real problem: a currency union whose second-largest economy is shrinking while its debt outlook worsens will struggle to rally on anything but a weaker dollar. What decides the pair this week is therefore mostly American: Tuesday's midterm elections, Eurozone October flash inflation on Wednesday, November 4, the Bank of England decision on Thursday, and Friday's US October jobs report — the week's biggest test for the dollar. Until Friday's payrolls print, EUR/USD is best read as a pair caught between a weak euro story and a retreating dollar, trading a narrow range where neither side has yet won.

FAQ

Why did the dollar fall despite a strong ISM PMI? The ISM Manufacturing PMI beat expectations at 55.5, but oil's ~6% dive on Iran peace-deal hopes reduced safe-haven demand and overrode the data.

Where is EUR/USD trading? Around 1.1182–1.1187 on November 2, with the euro gaining 0.24% to $1.1187 in the New York 5 p.m. data.

What are the key EUR/USD levels? Resistance at 1.1225, then 1.1250–1.1265; support at 1.1175–1.1190, then 1.1100–1.1115; weekly support at 1.1048.

Why is the euro under pressure? Fitch cut France's outlook to negative, citing weak growth, higher borrowing costs and debt-reduction difficulties; France's economy contracted 0.1% in Q3.

What data matters most this week? Tuesday's US midterms, Eurozone flash inflation November 4, the Bank of England decision November 5, and Friday's US jobs report.

Did German retail sales matter? They fell 2.0% month-over-month versus a +0.4% consensus, but traders ignored the release and focused on oil.

Read more on Zimbuck: https://zimbuck.com/pages/zimbucknews and join the discussion at https://zimbuck.com/groups/zimbuckmarketnews . Related reading on the site: How to Trade EUR/USD Around Big News: Midterms, Payrolls and Central Bank Decisions, https://zimbuck.com/blogs/853/How-to-Trade-EUR-USD-Around-Big-News-Midterms-Payrolls . Source for this story: FXEmpire, U.S. Dollar Pulls Back As Oil Prices Dive 6%, https://www.fxempire.com/forecasts/article/u-s-dollar-pulls-back-as-oil-prices-dive-6-analysis-for-eur-usd-gbp-usd-usd-cad-usd-jpy-1642006 . Join Zimbuck at https://zimbuck.com to follow more forex coverage.

This article is market news and general information only, not financial advice.