The U.S. dollar traded higher Friday when it became clear that the tax bill would pass the Senate. While the market’s focus should be on the tax reform success, there is a dark cloud hanging over U.S. President Trump. A potential case of obstruction of justice against Trump may be building up, which is bad news for Trump and consequently the U.S. dollar.
Apart from the developments in Washington, market participants will watch the November Nonfarm Payrolls Report on Friday, which will be the most interesting piece of data this week. Until Friday, however, the week is relatively light on top-tier economic data. Any new headlines from Washington DC could affect the dollar’s price action in the near-term.
The pound sterling consolidated and gave up some of its recent gains. While the pound’s recent uptrend was driven by hopes of a Brexit breakthrough there is a warning of a ‘buy the rumor, sell the fact’-dynamic. Even if Brexit talks advance this week, the pound could experience sharp corrections now. U.K. Prime Minister Theresa May heads to Brussels today where she will meet European Commission President Jean-Claude Juncker and while today’s meeting could be positive for the pound, there are still a few hurdles to overcome in the second phase of negotiations talks, which is why traders should also prepare for potential setbacks.
GBP/USD
The overall uptrend is still valid but traders should prepare for pullbacks now. For bullish momentum to accelerate, the pound would need to break above 1.3665.
EUR/USD
The recent price development of the euro attracts our attention now since there are chances of both bullish and bearish breakouts. If the euro climbs above 1.1940 we expect further upside movement towards 1.2030. If the euro, however, falls below 1.1830 and farther the crucial support at 1.18, we could see the pair tumbling towards 1.1730/1.17.
We wish you good trades and many pips!
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