31.10.201715:17 Forex Analysis & Reviews: Global macro overview for 31/10/2017

Global macro overview for 31/10/2017:

The recent weeks have left investors sharply negative about the US Dollar. Just two months ago, the market discussed d the low probability of tax cut approval and a rate hike in December. Today, both scenarios are baseline, which, together with the fears of a US-North Korean conflict and strong rises in energy and industrial commodities prices of nearly 50 bps, have pushed the US ten-year bonds higher. The room for further strengthening of the US Dollar is still big. Especially, if the global investors consider that the market in less than 50% discount the interest rate hikes suggested in the Fed projections for 2018. At the same time, the process of reduction of the balance sheet total and the impact of increasing the debt limit on the absorption of excess liquidity in the financial sector are not sufficiently taken into account.

On the other hand, the successor to Yellen seems to be settled. It is almost certain it will be Jerome Powell. However, this is not a threat to the USD, since such a choice has already been priced in. It is worth noting, however, that the FOMC decision-making board will change slightly towards "hawkish" point of view if Taylor or Warsh will make it to the Board of Governors.

Let's now take a look at the US Dollar Index technical picture on the H4 time frame. The sequence of higher highs and higher lows continues. There is only one technical support left to be tested in order to continue the local uptrend and it is at the level of 94.26. Only a sustained breakout below the golden trend-line support would change the bias to bearish again.