U.S. President Donald Trump’s tax-plan announcement had little impact on the market as it foreshadows an uphill battle in U.S. Congress. While Trump said the tax-cut plan was aimed at helping working people and making the tax code fairer, there is concern about the budget deficit. The plan contained only few details on how to pay for the tax cuts without expanding the budget deficit and adding to the nation’s amount of debt. The plan must be turned into legislation and investors are still skeptical that Congress could approve a tax bill in the near future.
The U.S. dollar slightly extended its climb against the euro and British pound as market participants raised their expectations for one more Federal Reserve rate hike this year. The priced-in probability of a December rate hike is now 70 percent.
Traders should keep an eye on the U.S. GDP figures, due for release at 12:30 UTC. In case of a surprise we will see more volatile fluctuations in the USD crosses.
The British pound extended its slide and fell below 1.3380. However, the dip below that support level was not sufficient to increase bearish momentum and we now expect the pair to find some support around 1.3350. Looking at the 4-hour chart we see the Relative Strength Index (RSI) approaching oversold territory. This situation may encourage buyers to take long positions above 1.3340. If the pound climbs back above 1.3430 we could see a run for 1.35.
Traders await a speech of Bank of England Governor Mark Carney at the BoE Independence conference at 8:15 UTC. If Carney raises rate hike expectations the pound could quickly recover from its lows.
The euro continued its short-term downtrend and fell towards 1.17. As stated in yesterday’s analysis we expect a stronger support coming in between 1.1710 and 1.1680. Buyers of the EUR/USD should now wait for prices above 1.1825 in order to buy euros towards 1.19.
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