The US dollar was down yesterday, although it has made up most of its losses as of this morning. The dollar continues to hover in short-term overbought territory based on various technical indicators, and is thus at risk of a correction. Looking at news, the House Ways and Means Committee has started marking up the draft tax bill. Over the next three days, the bill will be modified based on inputs from both Republican and Democrat House representatives. Kevin Brady, Chairman of the Ways and Means Committee, is looking to end the markup process this Thursday, given an internal deadline to pass the tax bill by Thanksgiving. According to a recent report from Bloomberg, the Senate Finance Committee is likely to unveil its own markup on the bill shortly. Given that Republicans have a much narrower lead in the Senate, the biggest risk for tax reforms is the Senate failing to pass the bill.
USD/JPY is currently trading at 114.10. EUR/USD remains weak and is now below 1.1590. The pound is mostly stronger, although it is down slightly this morning, with GBP/USD currently above 1.3150.
This is a relatively light week for the US dollar looking at the economic calendar. Later today, we’ll see consumer credit growth figures. On Thursday, we’ll see continuing and initial jobless claims. Last week the Fed did not raise interest rates, choosing instead to set the stage for a hike in December.
Thanks to progress in enacting Trump's tax reforms, the US dollar has been strengthening since mid-October. The currency has also been supported by rising bond yields as Trump looks set to select the next Federal Reserve Chair. As such, we are upgrading our medium-term outlook on the dollar back to bullish. After looking oversold in early October, the dollar is now trading within normal conditions. This is based on technical indicators when looking at a weekly chart.