EUR/USD continues to edge higher toward the key parity level. A break above here could trigger a sharp short squeeze to 1.02, economists at ING report.

Next week's Fed meeting could provide some more support to the dollar

“It has been several weeks in the making, but it does now seem that EUR/USD is responding to the lower natural gas prices and the improvement in the terms of trade position. We should be a little careful here since EUR/USD is now threatening to break out of a bearish channel that has contained price action all year. That means a break of 1.00 could trigger quite a sharp short squeeze to 1.02 and at the very least slow the rate (5% per quarter) of this year's EUR/USD decline.”

“It is probably a question then of whether the 1.00 level can hold EUR/USD up to and including tomorrow's ECB meeting, before next week's Fed meeting could provide some more support to the dollar.”