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DailyFX US AM Digest: US Dollar Drifts Lower; US Housing Market Outperforming

DailyFX US AM Digest: US Dollar Drifts Lower; US Housing Market Outperforming

Research, Research Team

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The US Dollar continues to drift lower as it awaits developments around the tax bill reform legislation currently making its way through the US House and Senate. The House is expected to vote on the bill on Tuesday morning, while the Senate should be able to vote on it by Tuesday evening or Wednesday morning. In all, the legislation should be signed into law by US President Trump before Christmas Day next Monday.

Yet with long-end US Treasury yields failing to rise meaningfully alongside US equity markets, there is a growing belief that the tax reform bill will be positive for corporate earnings in the short-term, but have no significant growth impact beyond increasing the deficit in the long-term. Implementation of such fiscal policy doesn’t appear to be motivating traders to price in a more hawkish FOMC for 2018 either; two rate hikes are still being priced-in as was the case after the December FOMC meeting last Wednesday.

DailyFX Economic Calendar: Tuesday, December 19, 2017 – North American Releases

The North American economic calendar is wrapped up for the day, given that there were Canadian or Mexican data due, and the American economic data has already been released. In sum, the November US Building Permits and Housing Starts point to a stronger housing market than previously expected, keeping Q4’17 US GDP expectations running above +3% annualized.

DailyFX Webinar Calendar: Tuesday, December 19, 2017

IG Client Sentiment Index Chart of the Day: EURUSD

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

EURUSD: Retail trader data shows 39.9% of traders are net-long with the ratio of traders short to long at 1.51 to 1. The number of traders net-long is 0.6% lower than yesterday and 10.5% lower from last week, while the number of traders net-short is 3.1% higher than yesterday and 4.8% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger EURUSD-bullish contrarian trading bias.

Five Things Traders are Reading

  1. “US Dollar Grinding Lower Awaiting Tax Bill Votes” by Christopher Vecchio, CFA, Senior Currency Strategist
  2. “US Housing Market Resilience Persists; Current-Account Deficit Shrinks” by Dylan Jusino, DailyFX Research
  3. “Technical Analysis for DAX, S&P 500, Gold & Silver, Oil, and More” by Paul Robinson, Market Analyst
  4. “EUR/GBP Range Trades But Downside Looms” by Nick Cawley, Analyst
  5. “Sideways Trading Through End of 2017 Looks Likely for Euro” by Christopher Vecchio, CFA, Senior Currency Strategist

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.