The US dollar is mixed today. The currency is flat against the euro and the British pound, while gaining against the Australian dollar and the Canadian dollar. Looking at recent news, the US dollar enjoyed a small boost after Republicans and Democrats struck a deal to fund the government last night. The deal allows the US government to continue operating until February 8. President Trump has offered extending the DACA program in exchange for higher military and border security investments. According to a tweet this morning, he is optimistic that both sides will ultimately work out an arrangement. Looking at recent data, the Chicago Fed national activity index for December was lower than expectations. The figure is not typically a big driver for the US dollar. Despite strong US growth, USD remains fairly weak. Our short-term and medium-term outlook on the dollar remains bearish.
USD/JPY is down today and currently trading above 110.760. EUR/USD is flat and is trading above 1.2260. The pound is flat, and GBP/USD is currently above 1.390.
Looking at economic data this week, markets will be watching PMIs and Q4 GDP figures. The Chicago Fed National Activity Index was lower than expectations (0.27 vs. 0.44 expected). Tomorrow, we'll see the housing price index and Markit PMIs (manufacturing, services and composite). On Thursday, we'll see initial jobless claims and new home sales. Finally on Friday, we'll get Q4 GDP and durable goods orders. Last week, industrial production figures exceeded consensus estimates by a large margin.
Thanks to recent dollar weakness, we are downgrading the US dollar to bearish. 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.