– Trading next 94.29, a DXY Index is melancholy to mangle a laterally operation given Oct 26 and a uptrend from a Sep 8, 20, and Oct 13 lows.
– With Fed supports pricing in a 100% possibility of a travel in December, swell of taxation remodel legislation is a pivotal motorist for a US Dollar.
– Retail merchant sentiment had formerly shifted to a neutral USD outlook, suggesting that a spin might be coming.
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Ever given Oct 26, when Fed supports futures initial entirely priced-in a 100% possibility of a 25-bps rate travel in December, a US Dollar (via DXY Index) has been trade sideways. With financial process radically private as a near-term catalyst, a categorical motorist for a US Dollar has come from a mercantile side: the swell of taxation remodel legislation.
While a US mercantile calendar has some critical information in a days ahead, a small fact that Fed supports are sealed in during 100% for Dec means a arriving information won’t lift a same weight it routinely does. This has combined a bit of uneven risk for a greenback: good news is entirely priced-in; bad news is not.
Concurrently, this means that even a small bit of positivity from one of a banking counterparts could leave a sizeable impact. Such is a box currently where, in aggregate, a miss of swell on US taxation reform, some-more risk hatred globally, and a hitch of improved than approaching Euro-Zone mercantile information have simply knocked a US Dollar back.
Chart 1: DXY Index Daily Timeframe (July to Nov 2017)
As such, a US Dollar is looking increasingly exposed in a near-term, with not usually a two-week operation from Oct 26 melancholy to break, though a uptrend from a Sep 8, 20, and Oct 13 lows entrance underneath vigour as well. The neckline of what could be noticed as a intensity different conduct shoulders settlement during 94.29 is also being tested today. Momentum has started to pitch reduce as well, with a DXY Index trade next a daily 8-, 13-, and 21-EMAs, and MACD and Stochastics trending reduce (albeit in bullish domain still).
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
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