News & Analysis

U.S stocks end week higher – Tax Bill vote; USD recovers breaking AUD winning streak. Gold trimmed gains after 1260.60 test.

Dec 18, 2017 | Daily Market Outlook

Today’s high impact news:

No high impact news today or tonight.

U.S stocks rebounded on Friday on hopes tax reform will pass its vote. What looked like a possible correction on Thursday was reversed as the tax bill returned confidence to buyers. The Dow Jones jumped by 143.08, the S&P500 jumped by 23.80 and the NASDAQ added 80.06 in a very strong session. The three indexes recorded fresh record closes on Friday as expectations of a Republican tax bill passing increased. The plan proposes to cut the corporate tax rate to 21 percent from 35 percent. Expectations of lower corporate taxes have helped boost stocks to record levels this year. Entering Friday’s session, the S&P 500 had risen 18.5 percent. Lawmakers are expected to vote on the bill this week. “I think the bill is likely to pass, but if it doesn’t, we could see a 5-to-10 percent decline in stocks,” said Ed Keon, managing director and portfolio manager at QMA.

In Europe markets closed mixed, the DAX added 35.48, the FTSE added 42.45, and the CAC closed slightly lower by 7.84 points. Retail stocks were by far the worst-performing sector, down more than 2 percent, after H&M reported fourth-quarter sales below its own expectations. Shares of the fashion retailer fell almost 13 percent to their lowest level since 2009. Corporate deals helped buyer confidence, Deutsche Telekom agreed to buy the Dutch business of Tele2. Brexit news, European leaders formally agreed to begin the second phase of Brexit talks. Prime Minister Theresa May told her counterparts she is on track to deliver Brexit.

USD rallied on Friday, as Republican negotiators in the U.S. Congress put the finishing touches on a sweeping tax overhaul, raising expectations that the bill would be passed by year-end. The Cost to borrow short-term dollars has surged. The USD rallied knocking the EUR and AUD lower. The GBP fell to the USD but Brexit was another factor in its decline on Friday. The AUDUSD snapped its 4-day winning streak to close 23 pips lower. The USDJPY reversed after making a new weekly low to close 20pips higher. The daily chart is showing support from 112.16. Gold bucked the USD rally to close $2.40 higher. Buyers were looking at a strong session Friday as price added $9.00 and tested 1260.60. Traders should keep an eye on this daily level as it may become confirmed resistance.

Despite Japanese Yen strength on Friday, pairs have started the week stronger this morning. The EUR, AUD and GBP are trading higher. The USD is trading slightly weaker to start the week and the ASX200 has started the week in the black trading 38.40 points higher off the back of a strong U.S lead.

GOLD – A strong session for buyers was cut short into the NY session as sellers emerged after the USD gained traction. 1260.60 looks to be setting up as resistance and the market could be forming a continuation pattern. Buyers would want to hold 1250 or seller pressure may see a new lower move. Seller confirmation is still required. 

Good trading from Eightcap.

Sources; CNBC.  All times are AEDST

 

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