Further USD decline?

U.S. Dollar weakness continues 5th consecutive week. This past week, U.S. Dollar Index, measuring the world reserve currency versus the volume-weighted basket of six major opponents, fell another 0.24%, showing negative performance of 0.86% at mid-week lows. Among fundamentals, there were negative economic reports: consumer confidence, housing starts and building permits, NY and Philadelphia manufacturing activity. But the main concern for the greenback was the potential U.S. Government Shutdown. The markets closed on Friday with a pullback in major currency pairs, helping the DXY to pare some losses. But the U.S. Senate failed to pass the vote for the Stopgap Bill later, which triggered the midnight deadline to fund the government. These news are definitely negative for USD and there is a huge probability of gaps in most currency pairs on Monday market opening.
Next trading week could add more skeptical woes to the negative USD outlook, which could push DXY for further losses, despite the current rates at 3-year low level. Not much of the data to be released on the economical front. Existing and New Home Sales, Goods Trade Balance and Weekly Jobless claims do not have a significant impact traditionally. But Friday’s Core Durable Goods Orders and Q4 GDP reports are very important for the Federal Open Market Committee in the scope of possible three rate hike in 2018, announced by the regulator.
Our general outlook for the USD remains bearish, but as the rates approached to important historical levels, corrections and pullbacks are likely to happen, especially closer to the end of the upcoming week. High volatility is very probable in all assets of the financial markets with such environment. One of the main focuses for traders and investors will be U.S. Treasuries market. With the bond yields (inverse to the prices) rising to long-term high levels, despite bullish stocks indices, abroad investors would prefer to find alternatives for capital flows. This trend could continue until new U.S. Federal Reserve Chairman Jerome Powell will start his term in February.