Asian FX Outlook: USD attracts buying interest on tax reform

Main topics

The USD traded on a firm footing as further progress on the US tax reform was achieved.

The USD is being backed by prospects of the bill signed before Christmas, with Congress tax negotiators likely to have a final bill by Dec. 22

The Senate poised for a vote on the tax bill negotiations with the House is the nexxt event to inject USD volatility. 

Talks to avoid a government shutdown due to lack of funding continue.

Bank of Canada kept its benchmark interest rate unchanged at 1%, leading to weakness in the Loonie as a potential surprise was not being ruled out.

In Asia, the Australian trade balance is the key event to watch out for, with expectations for a surplus of AUD 1.37 billion. 

UK PM May keeps facing mounting pressures to soften the Brexit divorce after EU exit. The Sterling should remain volatile, trading on a headline-by-headline basis. 


A look at FX majors

EUR/USD saw the downward pressures persist, coming into a key area of demand below 1.18. As long as the market fails to find acceptance sub 1.1750, the context of a potential 3rd wave higher remains valid. 

GBP/USD reflects a similar picture to EUR/USD, with USD-demand the main driver to push the rate sub 1.134. The pair will remain volatile on a Brexit headline-by-headline basis, with technicals, which remain short-term bullish, being secondary. 

USD/JPY is finding the 50% fib retrac from the Nov decline a nut too tough to crack, even on positive US tax bill news. A break of the recent lows has exposed 112.00 and a further retreat could be on the cards. 

AUD/USD sellers came back fast and furious after Australia's disappointing Q3 GDP reading, which makes the case of a temporary basing above 0.75-7550 doubtful. Immediate risk if for a retest of the trend lows. 


What happened?

US Nov ADP National Employment came at 190k vs 185k exp and 235k prev.

US Q3 Labor Costs Revised came at -0.2% vs 0.2% exp and 0.5% prev, while the US Q3 Productivity Revised came at 3.0% vs 3.3% exp and 3.0% prev.

US w/e MBA Mortgage Applications came at 4.7% vs -3.1% prev, while US w/e Mortgage Market Index came at 408.3 vs 390.0 prev. 

US crude stockpiles fell substantially vs gasoline inventories gain

Canada's Q3 Labor Productivity Rate came at -0.6% vs -0.1% prev (revised to -0.2%).

According to the Brexit Minister, the UK is yet to conduct a formal assessment of Brexit to the economy.   

UK Chancellor Hammond told reports that Britain has not yet decided on final Brexit aims.

Northern Ireland's DUP said that delays to make progress on border talks puts a Brexit deal in jeopardy. 

US Senate Majority Leader McConnell said that he is open to state break tweak.

Trump recognizes Jerusalem as Israel's capital.

S&P warned the US that a fiscal loosening strategy could lead to a rating revision.

 

Upcoming events

GMT
Event
Vol.
Actual
Consensus
Previous
Wednesday, Dec 06
07:00
0.5%
-0.3%
1.2% Revised from 1.0%
07:00
6.9%
7.0%
9.5%
07:00
17.68B
 
55.02B Revised from 35.82B
08:00
5.6%
 
4.3%
08:00
0.8%
 
0.4%
08:00
7.6%
6.2%
5.4%
08:00
6.3%
7.6%
6.2%
08:00
 
 
08:15
-0.1%
0.0%
0.1%
08:15
0.8%
0.9%
0.7%
09:00
6%
6%
6%
09:00
5.75%
5.75%
5.75%
09:30
95.1
 
92.9
10:30
 
 
n/a
0.30%
 
0.36%
11:30
8.8%
 
7.3%
12:00
4.7%
 
-3.1%
13:00
0.2%
0.2%
0.2%
13:15
190K
185K
235K
13:30
3.0%
3.3%
3.0%
13:30
-0.2%
0.2%
0.5%
13:30
-0.6%
-0.4%
-0.2% Revised from -0.1%
14:00
 
 
89.2
14:00
 
 
88.8
n/a
 
54.6
53.6
15:00
1%
1%
1%
15:00
 
 
15:30
-5.610M
-3.404M
-3.429M
20:00
 
340M
961M
22:30
57.5
 
53.2
23:50
 
 
$1,260.9B
23:50
 
 
¥135.6B
23:50
 
 
¥-156.2B
Thursday, Dec 07
n/a
 
 
-6.1%
00:01
 
 
104.8
00:30
 
1,375M
1,745M
00:30
 
 
3%
00:30
 
 
0%
n/a
 
¥3.120T
¥3.109T
05:00
 
 
115.8
05:00
 
106.2
106.4 Revised from 106.6
05:30
 
 
1.3%
06:00
 
$48.835B
$48.903B
06:00
 
$42.700B
$42.486B
06:45
 
3.1%
3.1%
07:00
 
4.3%
3.6%
07:00
 
1.1%
-1.6%
07:00
 
 
4.4%
07:00
 
 
-1.1%
07:00
 
745B
742B
n/a
 
0.1%
2.6%
07:45
 
€-4.600B
€-4.669B
07:45
 
 
€44.964B
07:45
 
 
€40.295B
08:30
 
3.9%
4.5%
08:30
 
0.2%
0.3%
09:00
 
4%
4%
09:00
 
 
276B
09:00
 
 
€123.69B
n/a
 
 
0.76%

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility.