Forex news for North American traders on December 12, 2017.

In other markets near the close:

  • Spot gold is trading up $2.15 or +0.17% at $1244.11. The low in gold did extend to a 5 month low at $1236.49 but rebounded in NY afternoon trading.
  • Crude oil moved lower. WTI crude oil is down -$0.47 or -0.81%. Brent crude oil is lower by -$1.12 or -1.73%
  • US yields are mixed. 2 year 1.827%, up 0.8 basis points. 5 year 2.170%, up 1.3 basis points. 10 year 2.401%, up 1.2 basis points. 30 year 2.773%, unchanged
  • US stocks were mixed with the S&P up 0.15%. Nasdaq down -0.19%. The Dow up 0.49%.

As the clock ticks closer to the FOMC decision tomorrow and the details and vote for the US tax reform, the market saw the USD strengthen and then weaken a bit into the close. Nevertheless, at the start of the NY session the USD was the weakest currency of the majors. At the end that distinction has been passed to the EUR and the GBP. The greennback is more mixed with gains against the EUR, GBP and CAD, declines vs the AUD and NZD and small changes vs the JPY and CHF (see table below).

Of course the clock may be ticking toward the FOMC and tax event, but the results are likely to surprise. Tomorrow the Fed will raise rates by 0.25% in Janet Yellens last meeting as the Fed chair. She - and the Fed - will also be reporting the dot plot for 2018. The expectations at the last cut was that the Fed would hike rates three times in 2018 and two times in 2019. Will that change now that we are a few months forward? That ultimately will be the driver of the dollar tomorrow.

The other upcoming event is the final cut of the committed tax plan. Some details were released late in the day by "sources" which included an increase in the corporate tax rate from 20% to 21% effective 2018. Also the mortgage deduction cap would be $750K. The House proposed lowering it from 1M to $500K. The Senate kept it a $1M in their respective plans. The compromise is in the middle at $750K. The proposed plan also looks to lower the individual upper tax rate from 39.6% and 38.5% to 37%.

At the end of the day, it is likely that the Republicans in the two houses will make sure that they have enough votes. If not, there will be problems in the market. Then when it is passed and sent to the President, there will be all sorts of back slapping and picture taking. The market will then need to decide, "whats next?". PS the debt limit extension is right around the corner on Dec 22nd, I guess.

The other focus ahead is the ECB, BOE and SNB decisions on Thursday (you can add Mexico central bank too). They each are not expected to do anything but the BOE does now have inflation at 3.1% (released today) which is above their upper 3% target.

What are some of the levels to eye in the new trading day?

The EURUSD has a key support area in the 1.1712-24 area (see post here). It just moved up to test the 200 bar MA on the 4-hour chart at 1.1745 (high reached 1.1748) and backed off to 1.1737 at the close. So a battle at 1.1712 below and 1.1745 above is ongoing into the new day. Look for the levels to provide trading clues/bias.

The GBPUSD had an up and down day with a rally after the inflation data in the London session leading to a fall the rest of the day. The low stalled ahead of the 50% retracement of the move up from the November low at 1.32938. The low reached 1.3301. Keep that level in mind on a downside test for support buyers. On the topside a move above 1.3337-40 should discourage the sellers today.

The USDJPY broke out of a triangle today and moved to a new high for the week (high since November 11). That rally stalled and there was a flush to a lower trend line on the back of comments from Sen Rand Paul (see post here). That move was reversed and the pair traded higher. Now, two trend lines are converging around 113.45 area. Stay above, is more bullish. Move below and longs will likely give up (get out/selll) - at least for a trade.