After ending flat yesterday, the dollar is selling off this morning. According to Reuters, the dollar sold off after Special Counsel Robert Mueller subpoenaed President Donald Trump’s campaign for documents containing specified Russian keywords. The latest news event suggests that Russian interference concerns are resurfacing once again. In other news, the US House passed the tax bill in a vote last night. Most House representatives voted along party lines, with a vote of 227-205. While the bill was expected to pass the House, it faces a much bigger challenge in the Senate. Yesterday, we reported that Republican Senator Ron Johnson is opposing the tax bill. The dollar continues to look oversold, while our short-term outlook remains bearish.
USD/JPY is currently trading just above 112.50. EUR/USD is up this morning. The exchange rate is currently just above 1.180. The pound is up today, with GBP/USD currently above 1.3230.
This week’s economic data includes the consumer price index, retail sales numbers and other figures. PPI numbers beat expectations by a wide margin (2.8% vs. 2.4% expected). CPI met expectations (2%) while Core CPI exceeded estimates (1.8% vs. 1.7% expected). Month-over-month retail sales also beat estimates (0.2% vs. 0.0% expected). Initial jobless claims (249k vs. 235k expected) were higher than expected, while continued jobless claims (1.86m vs. 1.90m) were lower. Capacity utilization was higher than expected (77% vs. 76.3% expected) while industrial production also beat estimates (0.9% vs. 0.5% expected). The Philly Fed manufacturing index remained in positive territory but came below expectations (22.7 vs. 25 expected). Later today, we’ll see the NAHB Housing Market Index, and housing/building starts. Last week, jobless claims missed expectations.
As the dollar falls on tax-related disappointment, we are downgrading the US dollar to bearish. The caveat is that the currency is looking oversold in the short-term time frame. Our analysis is based on various technical indicators when looking at a daily chart of the US dollar index.
As the dollar runs out of steam after the draft tax plans were published, we are downgrading the US dollar to neutral. The currency is neither overbought nor oversold today, and trades within a normal range. This is based on technical indicators when looking at a weekly chart.