US Dollar Technicals Find Little Clarity After Fed, BOE, & ECB
- The US Dollar sold off after the Wednesday FOMC meeting as expected, but there has been little follow through thanks to weakness in the British Pound and the Euro brought on by the BOE and ECB, respectively.
- USD/CAD's range still demands patience despite swings to both resistance and support in the past two weeks.
- Retail trader sentiment continues to suggest a mix trading environment for the US Dollar this week.
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While the past week of price action in the US Dollar has largely met our expectations - looking for strength after the November NFP report before selling into the Decemer FOMC meeting - unfortunately little clarity has been revealed as a result. It's evident that market participants still don't believe the Fed will hike rates three times next year, as rates markets are barely pricing in two during the 2018 calendar year.
Over the next two weeks, particularly around the holidays, it seems more likely than not that the Federal Reserve will not be a major influence on price action, and instead cede that ground to headlines regarding the progress of tax reform legislation out of Washington, D.C.
Even though yesterday, December 14, was the last fully-scheduled day for Congress on the calendar when we started the month, Republicans have vowed to get the legislation passed before Christmas. The news wire will be a potent source of event risk as the calendar dies down between now and December 25.
Putting these developments and headlines in context of other events - mainly the Bank of England and European Central Bank meetings yesterday - we're left with a DXY Index, a EUR/USD, and a GBP/USD that are all left directionless in the near-term. The technical pictures show that momentum has stalled, suggesting that it may be appropriate for traders to switch to more range-driven trading strategies through the holidays.
--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
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