Today at 2PM ET brings the Federal Reserve’s final rate decision of 2017. The wide expectation is that we’re going to see a 25 basis point hike, and this has been factored-in for some time now. More pressing, however, will be the bank’s tolerance towards rate hikes in 2018. The current expectation is for three; but if we do see that nudged up to four, which is very feasible given the prospect of oncoming tax cuts in the United States, we may finally see the Dollar exhibit some element of sustainable strength as we move towards year-end.
This has been a brutal year for the U.S. Dollar, and this probably took quite a few by surprise. We came into the year riding the wave of the Trump Trade as USD perched up to fresh 14-year highs. That strength flipped fairly quickly, and by mid-September, the Greenback had already moved-down by as much as 12.3%. Since that low was set on September 8th, we’ve seen Dollar bulls trying to get back in the driver’s seat but, up to this point resistance continues to hold. The zone that runs from 94.08-94.30 continues to offer resistance in DXY, as it has for much of the past three months save a two-week span where it showed as support after ECB in October.
U.S. Dollar via ‘DXY’: Near-Term Resistance 94.08-94.30
On a shorter-term basis, we’ve seen the Dollar climbing-higher since late-November. Yesterday even produced a quick test within that resistance zone; but sellers soon took over to push prices right back down. Another run towards resistance faltered this morning after a miss on CPI.
U.S. Dollar via ‘DXY’ Hourly: Bullish Channel Sees Price Action Re-Engage Key Resistance Zone
EUR/USD Holding at Key Support Zone, For Now
While the U.S. Dollar tests resistance, EUR/USD is testing support. This is also a zone that’s been in play for some time, save for a quick-break around that October ECB meeting. Prices first started to dig-in support around this zone in August. After multiple tests, support held all the way until the October 26 ECB rate decision, which finally brought on a breach. But that was short-lived, as a red-hot German GDP report just a couple of weeks later brought the bulls back into the fray, and prices popped right back above that prior support zone.
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