The US dollar is broadly weaker this morning after ending up last Friday. The dollar is selling off against all major currencies except the Japanese yen. As US bond yields rise, the yen is weakening thanks to lower interest rate differentials. Looking at news, Reuters is reporting that Republican Senator Susan Collins is undecided on the final tax bill. Her earlier support was crucial in passing the draft tax bill, as Senator Bob Corker voted against it. The US House and Senate will hold an open conference this Wednesday in order to reconcile differences between the two version of the tax bill. As the tax bill is expected to improve the outlook for US inflation, the dollar tends to rally when expectations of the bill passing through Congress increase. After last week's dollar rally, we will upgrade our short-term outlook on the currency to neutral later today.
USD/JPY is up and currently trading just above 113.550. EUR/USD is up today and currently just above 1.1750. The pound is up, with GBP/USD currently above 1.3410.
This is a big week for the US dollar in economic data and events. Wednesday is the most important day with both November CPI and the Fed’s interest rate decision and statement. As the Fed is widely expected to raise rates, markets will be focusing on the Fed’s outlook for inflation and rate hikes in 2018. On Thursday we’ll see retail sales, as well as Markit PMIs. On Friday we’ll see industrial production and capacity utilization. Last week, nonfarm payrolls beat expectations while wage growth disappointed.
As the dollar rises alongside higher inflation expectations, we are upgrading the dollar to neutral. Note that the currency is trading within normal conditions 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 rebounds from its lows in early September, we are upgrading 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.