Once again the USD is showing signs of revival. After yesterday hint by Paul Ryan that GOP was on their way of implementing the much needed corporate tax reforms, the USD popped. This was a USD shot in the arm and luckily it coincided with other events such as the developing bullish treasuries and weak PPI. Fortunately for USD bulls, investors shrugged the latter.
As a matter of facts, some sources indicate that details of these tax reforms will be available to the public as soon as next week. This is good considering the recent obstacles Trump and other republican has been facing when trying to change contentious bills in congress.
We are also eager to see what happens today as BoE are set to announce their interest rates before US CPI-which is turning to be the new NFP is released later in the NY session. Talking of BoE, it’s widely known that-just like the Feds, they are so data dependent and so far, inflation is racing towards the 3% mark with weekly earning expanding, it will be exciting to see their position when it comes to QE. Remember six weeks ago they reduced GDP and wage forecast blaming it entirely on Brexit. Mind you, BoC, ECB and Feds are in the process of tightening and it is likely that BoE won’t want to be left behind and they might be hawkish.
Despite this hawkish expectations from investors, contrarian theory might kick in and disappoint bulls and that is why, from technical formations, I will look to buy the Aussie this week. In the daily chart, price is obviously overextended with a whole candle forming outside the upper BB and chances of a correction lower is high. The 4HR chart action on the other hand is bearish.
I will trade as follows:
Stop Loss: Above 1.6620
TP: 1:3 risk reward. Ideally at 1.6170