Dollar gains momentum in European session amid short squeeze

The US dollar found fresh buying interest during early European trading hours as a short squeeze accelerated following yesterday's brief pullback. Major currency pairs saw the greenback strengthen across the board, with EUR/USD dropping back below key technical levels and GBP/USD reversing earlier gains. The move appears to be driven by position adjustments as traders who bet against the dollar were forced to cover shorts, amplifying the upward momentum. Market participants noted thin liquidity conditions exacerbated the price action, leading to sharper moves than fundamental factors would typically warrant. Technical indicators suggest the dollar's near-term uptrend remains intact, with resistance levels from earlier this week now acting as support. The squeeze highlights ongoing market positioning dynamics and suggests traders remain cautious about fighting the dollar's strength. Further gains could materialize if key resistance levels are breached, potentially triggering additional short covering.