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USD Dip Extends, Pressuring DXY to Two-Year Low

FOREX

EUR/USD inched to new two-year high early Tuesday as the USD index continues to trade heavy. The move began in earnest in early Asia-Pac trade, with USD/JPY falling further below the 106 handle, putting the DXY on track to hit new multi-year lows at 92.511. Next resistance in EUR/USD sits at the 1.1978 projection drawn from the May 7 - Jun 10 rally.

There's been no tangible newflow behind the USD dip today - move seemed to accelerate this week on release of the latest CFTC CoT report that disclosed leveraged funds had switched net short USD for the first time in over two years. With Tuesday's quiet schedule, markets will be watching for the US response as the NY crossover nears.

GBP has also been a beneficiary of the USD's pullback, helping GBP/USD narrow in on the Aug 6 high at 1.3186 and the 1.32 handle, which was last crossed in early February.

US housing starts and building permits numbers for July are the data highlights Tuesday. There are no notable central bank speakers today, but the next round of formal Brexit negotiations kicks off between EU and UK representatives.

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