News & Analysis

US Government Shutdown fails to halt Dow Jones; GER30 surges; USD index rebounds after lows tested; AUDUSD – EURUSD fail to hold Friday highs

Jan 22, 2018 | Daily Market Outlook

Today’s high impact news:

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U.S markets – closed higher on Friday as shutdown fears materialized on Saturday. Equity indexes ignored the uncertainty, the Dow Jones closed 53.91 points higher. The S&P500 closed 12.27 higher and the NASDAQ closed 40.33 points higher. On Thursday, the House passed a bill to keep the government open. The bill is now in the Senate’s hands, where 60 votes are needed to send it to President Donald Trump’s desk. Republicans only hold 51 seats in the Senate. “The prospect of a government shutdown isn’t putting a lid on this boiling marketÔÇöinvestors simply aren’t fazed,” said Mike Loewengart, vice president of investment strategy at E-Trade. “For traders, many are looking beyond the beltway and finding fundamentals in US companies as sound as they’ve been in a long time.” Historically, a government shutdown has led to a short-term pullback in the stock market. Equities have seen an increase in volatility this week. On Tuesday, stocks closed lower in a major reversal that knocked them off of record highs. This morning, US Senator Thune says hopeful of the vote tonight to re-open government with 3-week stopgap funding bill. European markets – closed higher on Friday, the DAX being the standout adding 153.021 points. The FTSE added 29.83 and the CAC closed 31.68 points higher. Eurozone stocks hit a 10-year high while the pan-European Stoxx 600 climbed to its highest level since August 2015, supported by a global equity rally. Eurozone current account numbers showed a wider account surplus in November compared to the previous month. Retail sales in the U.K. dropped in December, despite the Christmas season, as consumers took advantage of Black Friday deals. Volumes fell by 1.5 percent month-to-month in December, worse than the consensus for a 1 percent drop.

Forex – The USD index recovered from testing lows on Friday to close high creating a consolidation range. Traders should keep an eye on this area.

The AUD, GBP and EUR all rallied to the USD during Friday’s session until the USD fight back in the NY session. The AUD and GBP put in failed highs after strong rallies. The EURUSD tested 1.2295 before settling 25 pips lower. The USDCAD after three attempts finally held a run closing 69 pips higher closing at its highest level since the 12th of Jan. 1.2400 continues to be an import support area. The Japanese Yen fought back on Friday sending the majors lower. The AUDJPY failed to beat 89.00 for the 5th time. This level is starting to look like a solid point of resistance. The GBPJPY retested 153.40 after losing 95 pips. Buyers reengaged once this level was breached. If sellers are able to close below 153.40 we could be seeing a change in the short-term trend. Gold finished off highs on Friday but closed higher by $4.60 despite the USD fightback. $1326 continues to offer buyers support.

US30 – has formed a pennant pattern on the daily chart. Traders should keep an eye on this for a potential breakout.

Good trading from Eightcap.

Sources; CNBC; Investing.com. All times are AEDST

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