US dollar recovers as investors price in greater profit from tax reform approval

Current Events:

  • Perhaps the market does indeed have a short term memory  🤔
  • Last week, the US dollar sold off as Michael Flynn agrees to testify against Trump for direct contact with the Russians
  • Dollar then opens significantly higher in this week’s open as the Senate tax bill passed over the weekend
  • This contributed to a stronger dollar as corporations will realize greater profitability

Here below is a visual highlight of the recent events as highlighted by the Dow Jones CFD:

US30M15
US30 15-Minute

Moving onto currency pairs, I do have a few trade ideas for the upcoming week.

EURUSDH12
EURUSD 12-Hour

This pair is trading at a relative discount with the daily level still holding up. Despite the dollar bulls, my bet is still on further testimonial details by Flynn to drag the US dollar down. I would look for an entry closer to the daily level and ride the uptrend over on the longer term time frame.

eurusd
EURUSD

In terms of early pattern recognition, we should be a little bit concerned about the potential bearish future. I have placed a stop loss below the dashed daily level so we can expect one more trend change if this level doesn’t hold up. However, I still hold firm that Flynn will cause sell-off in the US dollar for the week ahead.

EURJPYH4
EURJPY 4-Hour

The next technicals play is on the fundamental weakness of the euro against the Japanese yen. This pair has been in a daily range for quite some time now and yet just hit the upper bounds a few bars back. It doesn’t appear the breakout will be happening so taking a short bias is a decent play here as well.

AUDJPYDaily
AUDJPY 1-Day

While I haven’t entered into this trade just yet, this pair is worth monitoring as it gapped to the upper daily boundary. Currently, I am not expecting this daily resistance to hold up given the number of days this pair struggled to make a new bottom. I would consider going long if this pair makes a temporary sell-off by filling the gap. Otherwise, I have no intentions on taking this trade.

GBPJPYH6
GBJPY 6-Hour

Finally, I took a small position in this range play as well. I expect the yen to be a big favorite as investors should flock to safe haven with the same fundamental factors as indicated above. Furthermore, the huge load up on the long side should expect to see some take profits happening as well. However, I do question the strength of this level given the test at the end of October.

Stay tuned for updates. Reflecting back, yen pairs are really key this week on a technical level.

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