FTSE +6 points at 7344 DAX +7 points at 13065 CAC -5 points at 5384 IBEX +2 points at 10210
The US dollar pared a part of yesterday’s gains against the G10 majors. Due to various positive and negative news in the US headlines, traders couldn’t fully benefit after the Senate passed the much-expected tax reform bill. The US domestic politics will likely remain the main driver on Tuesday. Investors focus on the federal spending plan to avoid a government shutdown, the US tax reforms as well as the Russian investigation.
The US stocks were mixed on Monday. The Dow Jones and the S&P 500 stocks renewed record, yet the sell-off in technology stocks dented the appetite. The S&P 500 technology sector erased 2.15% and the NASDAQ closed the session 1.05% lower.
Asian stocks were mixed as well. Topix (+0.23%) gained, while the Nikkei (-0.37%), the Hang Seng index (-0.57%) and the ASX 200 (-0.23%) edged lower.
The USD/JPY remained capped at 113.00 (minor 23.6% retracement on September – November rise) on Monday. The US yields eased following the kneejerk rise on the US tax reform approval. The 10-year yield returned below the 2.40% level. The weaker US dollar and the softening US yields could further weigh on the USD/JPY in the short-run. The first support is eyed at 112.16 (hourly Ichimoku cloud base) and 111.80 (200-hour moving average).
Gold consolidates within the lower range of the daily Bollinger bands. The lower band ($1’270) gives support to the recent weakness. More buyers are touted near the 200-day moving average ($1’265) to join the buy-side on fading boost in the US yields. The recovery could extend to $1’280/1’282 zone, including the 50-day moving average and the mid-Bollinger band.
The Reserve Bank of Australia (RBA) maintained its cash target rate unchanged at 1.5% as expected. RBA stated that the outlook for non-mining investment improved, while some employers have hard time finding the right skills. The commodity currencies were better bid in Asia. The Australian dollar was the biggest G10 gainer against the greenback, although the Australian trade deficit improved less than analysts expected in the third quarter. Exports slumped from 0.30% to 0.00% compared with 0.25% expected by analysts. The AUD/USD recovered to the daily upper Bollinger band (0.7650) on softer US dollar and firmer iron ore futures (+1.01%). However, traders remain seller on rallies due to a severe lack of carry appetite in this market caused by significantly squeezed rate differential. Resistance is eyed at 0.7685 and 0.7710 (50 and 200-day moving averages respectively).
The pound eased as the Irish border issue curbed the enthusiasm on an eventual progress in the Brexit negotiations between the UK and the European Union. The GBP/USD consolidated below the 1.35 level in Asia. Irish PM Leo Varadkar said that there is still time to reach an agreement before the Brexit talks resume on December 14. However, every lost battle means less hope for a significant progress in the Brexit talks and the time is running out. Businesses in the UK are impatient to have a clearer insight on the future. In the dirt of positive news, Cable will likely face some profit taking. The key Fibonacci support to the November rebound stands at 1.3355 (major 38.2% retracement). Intermediate support could be found at 1.3460 (100-hour moving average) and 1.3390 (200-hour moving average). Solid offers trail below 1.3550.
The EUR/GBP sees resistance near its 200-day moving average (0.8833). A lack of enthusiasm in the pound could gather a sufficient positive momentum to surpass this level. Gains could extend toward 0.8868 (minor 23.6% retracement on August – October decline).
The EUR/USD is rangebound within 1.1800-1.1900. Buyers are touted at 1.1805 (major 38.2% retracement on November rebound & 100-day moving average) as the 1.20 level is still targeted by the bulls, despite a softened positive momentum on German political uncertainties. Nevertheless, the DAX (+1.53%) outperformed its European peers on Monday, as investors see no major risks to the German economic activity or the European integrity at this point in time.