US Dollar pierces through 99 on tax plan disappointment

After an initial jump to 99.20 level, the US Dollar Index, which tracks the greenback against a basket of six trade-weighted peers, quickly changed direction following the announcement of proposed tax reform and dropped below 99, erasing most of its daily gains. As of writing, the index was at 98.80, still up 0.1% on the day.

• Full summary of Trump's tax plan

The primary concern with the proposed tax plan is the fact that it would cause the budget deficit to balloon. Republicans' counter-argument will most likely be focused on how tax cuts would help the economic growth accelerate. However, any bill that could potentially increase the national deficit beyond a 10-year window would require 60 votes to pass, forcing Republicans to steal eight votes from Democrats. 

In the meantime, U.S. stocks pared gains as the risk appetite decreased. After starting the day in a positive tone, 10-year U.S. Treasury bond yield slipped to %2.31 area, further weighing on the greenback.

Technical outlook

Daily low at 98.60 could be the first support for the index ahead of  98.30 (Nov. 10 low) and 98 (psychological level). On the flip side, resistances align at 99.20 (daily high) ahead of 99.75 (Mar. 23 low) and 100 (psychological level).