We continue to have our eye on EUR/USD which is vulnerable to a deeper correction. Its been trading in a very narrow range over the past week and has been relatively immune to the rising dollar. That should change in the near future as progress on U.S. tax reform lifts the greenback. The House Ways & Means committee plans to finish marking up the tax bill on Thursday and send it to a vote next week. At the same time, the Federal Reserve is preparing to raise interest rates while the European Central Bank maintains a dovish policy stance with no plans to raise rates until October of next year at the earliest. The GE-US 10 year yield spread has also fallen sharply, pointing to a steeper decline in the currency.
Technically, EUR/USD the daily charts show the 20-day SMA crossing below the 100-day SMA which is a bearish signal with prices capped below the 23.6% Fib retracement of the 2017 rally. It should only be a matter of time before EUR/USD tests 1.15.
