USD Off on Reports of Tax Delay

The US dollar falling off its Tuesday highs and equity futures are off (SPY -6, DOW Futures -35) on Washington Post report that US Senate Republicans may delay the corporate tax cuts by 1 year. But details could change ahead of Thursday's formal release of the bill by the Senate Finance Committee. The euro slumped again Tuesday but a late-day bounce showed the next move could be drawn out. The US dollar was the top performer on the day while the New Zealand dollar lagged. The Asia-Pacific calendar is light but Trump is in South Korea and could stir up geopolitical risk. The EURUSD and FTSE trades were stopped out befor a new trade has been posted in a major index (before the Tax story broke).

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EUR/USD touched 1.1553 before bouncing 30 pips to finish narrowly lower on the day. At the lows, it was the worst level since July 19. Most importantly, it helps to reaffirm the head-and-shoulders top on the chart.

The danger sign for the pair is bonds. US 10-year yields edged lower to 2.31% as they continue to fall away from the key 2.40% level. The low was just below the 200-day moving average. Economic data was limited to JOLTS at 6.093m, slightly better than the 6.075m consensus.

On the whole, the US economic calendar is light this week but the political calendar is busy. The House is aiming to pass the tax cut bill this week. The headlines are likely to be positive for the US dollar but the mood may quickly shift if it encounters problems in the Senate.

Oil is also a key focus as Saudi Arabia continues to crack down. On Tuesday, dozens of bank accounts were frozen but the oil market retraced a portion of Monday's big gain in part because of higher US inventories and a warning from OPEC that shale production could ramp up once again.

Trump will be a risk in the day ahead as he meets South Korean President Moon. Initial dialogue and comments were more constructive on the possibility of a deal with North Korea but the mood could shift any moment.