While the US dollar began trading yesterday on a strong note, it ended the day with smaller gains. This morning, the dollar is up slightly. Yesterday, the dollar fell after The Washington Post reported that Senate Republicans are considering a one-year delay in the implementation of corporate tax cuts while cutting the state and local tax deduction entirely. There no Republican senators representing high tax states such as New York and New Jersey, which is not the case in the House. According to the Post story, no decisions have been made but Senate Finance Committee Chairman Orrin Hatch is set to announce the committee's proposal on Thursday. If the House and Senate do not pass similar tax bills, it is unlikely that the tax reform bill will be passed in 2017. Some GOP lawmakers, including Ted Cruz and Darrell Issa, have also criticized the current bill according to a story from The Hill. The good news is that few have stated their intention to vote against the current draft. Looking at technical indicators on a daily chart, the US dollar remains in overbought territory.
USD/JPY is currently trading just below 113.80. EUR/USD remains weak and is now below 1.160. The pound is flat, with GBP/USD currently above 1.3150.
This is a relatively light week for the US dollar looking at the economic calendar. JOLTS job openings beat slightly (6.093m vs. 6.091m expected), while consumer credit growth was also better than expected (20.8b vs. 18b). 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.