New York Forex Report: Sterling Slides As Political Risk Rises

New York Forex Report: Sterling Slides As Political Risk Rises

New York Forex Report: The USD has slipped back broadly following reports late yesterday suggesting that Senate Republicans may plan a later implementation of corporate tax cuts (2019) and elimination of state and local tax deductions in their plan which is due to be unveiled tomorrow. President Trump is unlikely to welcome the former and Democrats are unlikely to support the latter. The news represents something of a “needle scratch” for the tax cut narrative that has done much to underpin the USD, via rising interest rates, in recent days and might represent another setback for the President a year on from his election victory. Yesterday, Democrat candidates won governorship elections in New Jersey and Virginia. Dollar losses are moderate and concentrated mainly against the AUD, NZD and CAD; the JPY has also picked up some support on the tax cut uncertainty. The GBP is under performing as local political risk continues to weight on sentiment

NORTH AMERICA Markets continue to watch for developments in the tax reform and President Trump’s trip in Asia. A Washington Post report in early Asia suggests Senate Republican leaders considering a one year delay in corporate tax cut though it could face resistance from President Trump who wants to implement immediately once passed. The Senate Finance Committee plans to release a tax bill as early as Thursday.

EUROPE Eurozone’s retail sector growth eased in October, according to PMI gauge that fell to 51.1 from 52.3 in September. Meanwhile, spending continues to firm up in the region, rising 3.7% YoY in September after 2.3% increase in the month prior. Sales were lifted by broad-based increase across major categories save pharma & medical goods, most notably in textiles, clothing & footwear (September: +8.5% vs August: +2.7%) and electrical goods & furniture (September: +5.2% vs Aug: +3.4%). Halifax survey of house prices in the UK revealed slower growth in October, registering a 0.3% MoM increase from the 0.8% gain previously, indicating slowdown remains the theme in the overheated housing market.

ASIA U.S. President Trump will be in China Wednesday-Thursday, with market eyeing the potential announcement of more commercial deals. On the agenda for Trump’s China visit will be the bilateral trade deficit and North Korea issues. China’s foreign-exchange reserves posted a ninth straight monthly increase to US$3.109 tn in October. The increase of US$0.7bn in October was lower than market’s forecast of US$1.5bn

EURUSD
Outlook: Short Term (1-3 Days): Bearish – Medium Term (1-3 Weeks): Bearish

Technical: 1-3 Day View –The close below 1.17 suggests second leg of broader correction underway targeting 1.1471 near term expect 1.1630/60 to act as resistance, only a move north of 1.1750 reasserts upside objectives.

1-3 Week View – 1.2130 the next upside objective. Weekly close below 1.16 neutralises bullish objectives opening a test of 1.14
Retail Sentiment: Neutral
Trading Take-away: Neutral

GBPUSD
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – Retest of 1.3330 sees a sharp reversal and price now testing broader range support at 1.3030 a failure here opens 1.2750 as the next downside objective, near term resistance is sited at 1.3150/70

1-3 Week View – 1.3263 achieved as this acts as support 1.3836 is the next upside objective only a close back below 1.30 would jeopardise the bullish advance.
Retail Sentiment: Neutral
Trading Take-away: Neutral

USDJPY
Outlook: Short Term (1-3 Days): Bullish – Medium Term (1-3 Weeks): Bullish

Technical: 1-3 Day View – 114.50 achieved as pivotal support at 113.80/60 caps corrective downside expect a test of 115, only a closing breach of 113 concerns the bullish bias

1-3 Week View – As 108.40 equidistant swing support survives on a weekly closing basis bulls will look for a grind higher to retest 115, a close below 108 negates the broader bullish theme and opens the psychological 100 magnet
Retail Sentiment: Neutral
Trading Take-away: Neutral

EURJPY
Outlook: Short Term (1-3 Days): Neutral – Medium Term (1-3 Weeks): Neutral

Technical: 1-3 Day View – The breach of range support at 132 concerns the broader bullish bias, however the failure to secure the second daily close sub 132 prompts a return to the middle of the 134.50 /1.3150 range

1-3 Week View – 136.10 is the principle upside objective as this area caps the current advance expect a retest of 131.50 to set a base for the next leg higher, a closing breach of 131 concerns the bullish basis.
Retail Sentiment: Neutral
Trading Take-away: Neutral

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