US dollar: forecast for Dec. 18-22

The Federal Reserve raised its benchmark interest rate by 25 bps and said that it expects to make 3 further rate hikes in 2018. The rate increase, however, didn’t help the USD much. There are several reasons for the greenback’s weakness. Firstly, the market was totally ready to such move and it was already in the dollar’s price. Secondly, the Fed expressed concern about low inflation and pledged to monitor this indicator. Finally, the next important meeting of the central bank will take place only in March, that’s why the USD bulls were not very active.

Another negative factor came from the hurdles to the US tax reform. There are reports that two US Republican senators tried to change the proposed legislation. As the Republicans’ majority in the Senate is shaky, there are worries which hurt the American currency. In the end, though, most people believe that the reform will go through.

At the same time, there were some good news for the dollar. US retail sales rose two times more than expected, while unemployment claims posted the second lowest reading since 1973.  

In the coming days, America will release building permits, current account, home sales, durable goods orders, core PCE price index and other data. These releases may offer some decent trading opportunities.

Technically, the US dollar index was held back by resistance in the 94.20 area and now looks vulnerable for decline to 93.00 and 92.50. A fix above 94.20 is needed to open the way up to 95.00.  

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