The U.S. President Donald Trump unveiled the much anticipated tax reforms, most of which was already priced into the markets. The new proposals included reducing the corporation tax from 35% to 15% and tax on small businesses being cut from 39.6% to 15%. The administration also vowed to simplify tax returns with the tax brackets being cut to three.
Companies with overseas cash were to be charged a one-time tax with a repatriation of profits being taxed at a lower rate of 10%.
The U.S. dollar closed with modest gains on the day but did not react strongly to the tax reforms. In other news events on the day, Canada's retail sales figures released yesterday showed a 0.1% decline on the core retail sales while headline sales fell 0.6%.
Looking ahead, the European Central Bank's meeting is scheduled for later today while on the economic front, the U.S. durable goods orders and weekly unemployment claims will be released.
EUR/USD intra-day analysis
EUR/USD (1.0903) formed an outside bar yesterday which comes after two straight days of solid gains posted by the common currency. With the ECB meeting due later today, the euro could be seen coming under pressure.
The recent weakness in the inflation data could possibly keep the ECB on a dovish tone although there is potential for central bank officials to acknowledge that recent pickup in the economic activity. Unless EUR/USD breaks out above 1.0941 to post a new high, we can expect to see a correction in store. A breakdown below 1.0850 will trigger further downside towards 1.0750 - 1.0740 where there initial support exists followed by a move towards 1.0675.
USD/JPY intra-day analysis
USD/JPY (111.22) closed with a doji candlestick pattern yesterday, and this could signal a possible decline in the coming sessions. For the short term, the BoJ's monetary policy decisions could bring some volatility but expect further downside in USD/JPY on a break down below the immediate support level at 111.00. The breakdown below 111.00 will possibly push USD/JPY lower to test the next lower support at 110.00 in the near term.
XAU/USD intra-day analysis
XAU/USD (1266.56) prices continue to remain biased to the downside with the next destination likely coming in at the support level of 1250.00.
In the near term, we can expect a short-term retracement as long as the previous lows formed at 1259.83 holds. To the upside, gold prices could be seen testing 1274.00,and a possible breakout above this level could signal a move towards the unfilled gap from last Friday at 1284.87.