The US Senate approves the tax bill in an important victory for Tramp and Dow Jones to record times
Headlines dominated trade with political developments weighing on the Dollar into the New York close. ABC News reported that former US national security advisor Michael Flynn was prepared to testify that President Donald Trump directed him to contact Russian officials.
However, the ABC later clarified the report and said that Trump’s instruction occurred AFTER the election, which lessened the significance of the discussions. Markets were already closed. The Dollar Index (USD/DXY) closed 0.19% down. Optimism that the Senate had the votes to pass the tax bill had been providing support for the Greenback.
The latest headlines early Saturday reported that the Senate had passed the tax bill. However, Friday’s markets were already closed. This morning the Dollar bounced right back to where it started.
Solid economic data enabled the Canadian Dollar to soar 1.6% against its North American Rival.
Canadian employment well exceeded forecasts with 79,500 jobs created against 10,200, and a previous 35,300. Canada’s Jobless Rate also saw an improvement to 5.9% from 6.3%, and a forecast of 6.2%. Canada’s October GDP rose 0.2% against 0.1% expected.
Earlier in the day, China’s Caixin Manufacturing PMI missed at 50.8 from 51.0.
UK Manufacturing PMI rose to 58.2 against a forecast of 56.6.
Wall Street stocks reversed gains to finished mixed weighed by sentiment. The Dow slipped 0.17% while the S&P 500 was little-changed.
Treasuries advanced. The yield on the US Ten Year Treasury dropped 5 basis points to 2.36%. Germany’s Ten year Bund yield fell to 0.30% from 0.36% Friday. The yield on the Japanese Ten Year JGB finished flat at 0.03%.
USD/DXY – down to 92.892 from 93.055 Friday, the lowest close last week.
USD/JPY – falls to 112.18 (112.61). Risk sentiment sours on Flynn report.
USD/CAD – falls 1.64 % to close at 1.2690 (1.2905 Friday).
EUR/USD – little-changed to 1.1898 (1.1895 Friday)
GBP/USD – slips to 1.3475 (1.3525 Friday). Traders were cautious ahead of May-Juncker meeting later today.
AUD/USD – climbs to 0.7610 (0.7565) on generally weaker US Dollar, stronger metals.
Outlook: A volatile end to an event-filled week and already more of the same today. This morning the headlines over the weekend that the US Senate has passed the tax bill has seen the Dollar come straight back up from Friday’s close.
Opening levels this morning:
USD/JPY – 112.90 (112.20); EUR/USD – 1.1863 (1.1898); GBP/USD 1.3440 (1.3474); AUD/USD 0.7600 (0.7610); USD/CAD 1.2705 (1.2691).
There is a lot of noise which traders will have to sift out as the day goes by. Politics will continue to drive markets. Economic data is light today, although this week sees the RBA and BOC policy meetings as well as US Payrolls.
Events and economic data due today:
Australian TD Securities Inflation (y/y): (GMT 12 am, Dec 4/Local Time 11 am, Dec 4) previous was 2.6%
Australian Q3 Company Operating Profits and ANZ Job Advertisements: (GMT 12.30 am, Dec 4/Local Time 11.30am, Dec 4): Company Operating Profits forecast 0.3% from -4.5%; ANZ Job Ads forecast: previous was 1.4%
Spain October Unemployment Change: (GMT 8 am, Dec 4/Local Time 7 pm, Dec 4) forecast: 54,300 from previous 56,800
UK Construction PMI: (GMT 9.30 am, Dec 4/Local Time 8.30 pm, Dec 4) forecast: 51.2 from 50.8
Euro Zone November PPI (y/y) forecast: 2.6% from 2.9%
US November Factory Orders: (GMT 3 pm, Dec 4/Local Time 2 am, Dec 5) forecast 0.0% from 1.4%.
Trading View: Just another manic Monday (recalling the Bangles hit in 1984) … What’s next? While the US Senate has approved the tax bill, there are still a number of hurdles to be cleared. The Senate’s version of the bill has to be successfully merged with that of the House of Representatives.
In Europe, the next phase of Brexitbegin even as the Irish border issue remains to be resolved. The RBA meets on interest rates tomorrow and are expected to keep policy unchanged. The Bank of Canada has it’s meeting on Thursday. US Payrolls November Payrolls are due on Friday. The FOMC looks set to raise interest rates again at its upcoming December meeting.
The implications of the Flynn investigation is that it may lead to more key Trump people.negotiations
EUR/USD – failed to clear the 1.1940 hurdle and fell back to close just under 1.1900. This morning, EUR/USD was marked down to 1.1860. Immediate support lies at 1.1840 and then at 1.1820. The key support level remains at 1.1800. Immediate resistance can be found at 1.1900 and then at 1.1920. A consensus that European officials will be concerned if the Euro breaks through 1.2000 as well continuing long Euro speculative community will keep EUR/USD capped. Likely range today 1.1840-1.1900.
USD/JPY – dropped to a low of 111.41 on Friday before settling to close at 112.20. This morning’s opening saw jump back to 112.75 before settling at its current 112.70. The US Ten Year yield will continue to be the main driver of USD/JPY. Immediate resistance lies at 112.85 and 113.00. USD/JPY has immediate support at 112.30/40 and then at 112.10. Likely range today 112.20-112.90. Look to sell rallies
GBP/USD – slipped to close a touch lower after trading to an overnight high of 1.35493. UK Manufacturing PMI exceeded expectations with a gain to 58.2 against 56.6. Solid economic data has been providing support for the British Pound. Brexit negotiations go into the next phase with PM May expected to lodge a new offer for the “divorce” bill to European Union officials. GBP/USD has immediate resistance at 1.3500 and 1.3520. Immediate support can be found at 1.3450. Likely range today 1.3440-1.3500.
AUD/USD – bounced off its lows once again at 0.7550 (overnight low of 0.7551) on Friday. The Aussie traded up to a high of 0.7639 before settling at 0.7610 at the New York close. The lift in the US Dollar this morning saw AUD/USD back to 0.7590 support. Metals were higher on Friday, led by Copper. AUD/USD is evenly balanced between 0.7550 and 0.7650. Likely range today 0.7575-0.7625. Trade the range.
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