News & Analysis

US Government Shutdown ends Dow Jones hits new records; USD – JPY drop; GBPUSD tests 1.4000; Oil bounces off 63.20

Jan 23, 2018 | Daily Market Outlook

Today’s high impact news:

Tentative; JPY Monetary Policy Statement – BOJ Outlook Report – BOJ Policy Rate
▸ 17:30 JPY BOJ Press Conference

U.S markets – rallied overnight as the government shutdown came to an end on Monday. The Dow Jones added 142.88, The S&P500 added 22.67 and the NASDAQ closed 71.65 points higher in energized buying. US indexes start lower but erased loses once Members of the Senate reached a short-term compromise to keep the government open through Feb. 8. Democratic Sen. Mark Warner said the party has the assurance it needs on the budget and immigration issues.  “Anyone with capital markets experience knows that US government shutdowns are largely meaningless in the context of financial asset values,” said Nicholas Colas, co-founder of DataTrek Research, in a note. “Getting sucked into a series of seemingly ominous headlines that smarter players already understand is a typical rookie trading mistake.” Earning also contributed to trader enthusiasm last night, Halliburton reported better-than-expected earnings, sending the company’s shares up 3.7 percent. Oil bounced off $63.20 overnight, closing higher and snapping a three-day losing streak. Price closed 40 cents higher. While $63.20 holds we’re looking for possible further gains. European markets – traded mixed on Monday, the FTSE closed 15.35 lower while the DAX closed 29.24 points higher and the CAC closed 15.48 points higher. The FTSE was weighted down by William Hill as it slumped 11.6%. UBS reversed losses by the close, ending slightly higher. On Monday, the Swiss bank reported a net profit of 1.165 billion Swiss francs ($1.25 billion) for the whole of 2017, weighed down by a write-down in the fourth quarter which related to the new U.S. tax overhaul.

Forex – the USD and JPY sunk overnight as the US came out of its shutdown. The USD has hit a 3-year low weighed by a government funding deal. Many market players expect the BOJ to wait several months, and possibly many more, before tightening its policy, given the country’s inflation is nowhere near its two-percent target. The AUDUSD added 18 pips and is trading back above .80 cents this morning. The GBPUSD surged by 108 pips, testing 1.4000 this morning. The USDJPY recovered by 39 pips but the USDCAD lost 34 pips. We saw big moves on the majors to the JPY. The AUDJPY added 50 pips and is trading above 89 this morning. The GBPJPY added 1508 pips! Has made new 2018 highs this morning. Gold recovered from earlier losses to finish slightly lower. Buyers have added 2.60 this morning. The USD consolidation we posted yesterday continues to hold after testing its range low. Heavy Bank of Japan news day coming up, traders by last night ’s actions are looking for further BOJ sitting before policy tightening.

US30 – broke its pennant last night, re-posting this set-up as it’s a good example of a pennant pattern as trend continuation.

Good trading from Eightcap.

Sources; CNBC.  All times are AEDST

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