USD: forecast for Dec. 11-15

Last week was quite positive for the USD. American currency got a lift from the US tax-reform optimism and expectations of more interest rate increases.

The Congress passed legislation to temporarily fund the government through Dec. 22. There are signs that the Senate and the House of Representatives could agree on a final bill by that date.

This week on Wednesday, there will be a meeting of the Federal Reserve. So far, Fed funds futures prices show that market is completely ready for a rate hike at this meeting. Traders are trying to figure out how many more hikes to expect in 2018. For now, most predictions include 2-3 rate increases next year. However, for the expectations of multiple rate hikes that could lift the USD, there should be higher inflation prints. Wage inflation didn’t impress the market, so producer price index (PPI) on Tuesday and consumer price index (CPI) on Wednesday will have to do better. Otherwise, the USD may suffer. In addition, note that this is the last meeting for Janet Yellen as the Fed’s chief. She may either hint on further moves of the central bank or leave it to her successor Jerome Powell.

The US dollar index rose up to the 94.00 area last week but didn’t manage to close above this resistance. The index formed a shooting start on the daily chart on Friday. It means that the USD is likely to get lower before any further advance. Support is at 93.70, 93.20 and 93.00. Resistance is at 94.00, 94.30 and 95.00.


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