This week opens with a lighter economic docket than what we’ve seen over the past couple of weeks, and next week brings the Christmas holiday as we move towards year-end. From what we do have on the calendar, it appears as though the primary focus will be on the latter portion of this week. Wednesday afternoon brings New Zealand GDP, and later that evening we hear from the Bank of Japan for their final rate decision of 2017. Thursday morning brings Canadian CPI, and Friday morning brings GDP from Canada along with U.S. Durable Goods and PCE, both released at 8:30 AM ET.

From a price action perspective – one of the more pronounced themes throughout this year caught another shot-in-the-arm last week; as U.S. Dollar bears took-over after another test of resistance. This happened even while the Fed hiked rates again, bringing the total to five rate hikes in the past two years.

U.S. Dollar via ‘DXY’ Eight-Hour Chart: Resistance Hold Through Last Week’s Rate Hike

Chart prepared by James Stanley

The big question as we move into 2018 is whether this year’s weakness was a correction in a bigger-picture, longer-term theme; or whether this is the start of a chain of weakness that can run into and perhaps even through next year.

On the side of USD-weakness running through next year: We’d basically be looking for European growth to continue to the point where the ECB is able to more aggressively taper stimulus, but this likely wouldn’t take place until the second half of next year as we near the end of the current stimulus program in September. So, we’d basically be looking more for market anticipation than any actual news out of the ECB. This was the big driver in both Euro and U.S. Dollar trends throughout this year, as European growth continued in a rather consistent manner to the point where the bloc appears to have grown faster than that of the U.S. The U.S., meanwhile, has now seen five rate hikes in the past two years, and the ECB remains ‘pedal-to-the-floor’ on the stimulus front. If we are going to see global growth continue in the manner in which we’ve seen in 2017, the ECB may have some catching up to do, and this can equate to further Euro gains next year as markets prepare for a stimulus exit and eventually higher rates out of the ECB.