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Dollar index flat lined as US tax bill stumbles

  • Dollar index trades comatose.
  • US tax bill stalls on the deficit-focused trigger.
  • Yield curve flattening stalls.

The Senate tax bill vote postponement is weighing over the American dollar in Asia, leaving the dollar index flat lined just below 93.00 levels.

A Republican tax overhaul stalled on a procedural issue in the U.S. Senate on Thursday after the Senate parliamentarian barred Corker’s “trigger” proposal on procedural grounds.

The 10-year yield trades above 2.4 percent

Still, the greenback has been able to avoid losses, courtesy of the resilient treasury yields. As of writing, the 10-year yield is trading above the key resistance level of 2.4 percent.

Also, the relentless pace of curve flattening (sharp decline in the 10-year yield and relatively resilient 2-yr yield) appears to have come to a halt. Currently, the spread stands at 62.32 basis points vs. a recent low of 57.90 basis points.  The uptick/curve steepening could help the USD regain some poise.

Looking ahead - the dollar bulls would want to see progress on the tax bill front. However, it is unclear whether the vote will happen today. Investors would also look for signs of labor market strength in the ISM manufacturing report due for release today.

Dollar Index Technical Levels

Reuters report says, "10 & 20 DMAs fall, signal net bearish setup. Close above 93.50, 38.2% of Oct/Nov fall would end downside bias. Resilient support around 92.50/60, 61.8% Sep/Nov rise & this week's low. NY 92.72 low & London 93.50 high initial support/resistance."

 

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