New York Forex Report: Tax Debate & Delay, Giving Dollar Doubts

New York Forex Report: Tax Debate & Delay, Giving Dollar Doubts

New York Forex Report: The USD is under modest pressure in early trade. The JPY is leading gains versus the big dollar. Sharp swings in Japanese stocks earlier (reflecting position adjustment, locals say) boosted the JPY and cast a negative pall over European markets and US futures which are trading more defensively as our session picks up. Developed market bonds are, however, mostly lower which suggests no significant move to more risk averse positioning. Meanwhile, major commodity prices (crude, gold, softs) are firmer; WTI is holding around $57 after a soft close yesterday. USD pressure comes ahead of the unveiling later today of the Senate Republicans’ tax cut plan; signs that the outline may diverge from both the House plan and the direction President Trump wants tax cuts to go in suggest that progress towards a workable deal may be difficult. With no US data on the slate beyond weekly claims and wholesale inventory/trade data, markets may struggle for a stronger sense of direction in the near-term.

NORTH AMERICA US consumers chalked up more credit in September, with the amount rising by $20.83b after climbing $13.14b. This brought credit-card debt a tad above $1 trillion, a level not seen since early 2009. Mortgage applications stagnated in the week ended 3 November, after dipping 2.6% WoW in the week before. The White House is expected to announce more than $250 bn in business deals in China according to officials as one of the key agenda is to address the bilateral trade deficit. Many of the deals are expected be in the form of nonbinding memorandums of understanding, not contracts

EUROPE The European Central Bank (ECB) should wind down its asset purchases quickly and set forth to normalise its expansive monetary policy, according to a report from a panel of economic advisers to the German government, the 5 “wise men”. UK house prices increased at a softer pace in Oct; according to RICS survey, the balance between respondents reporting house price increases versus others narrowed to 1% in October from 6% in September, affirming that the heated housing market continues to cool.

ASIA U.S. The JPY tracked (inversely) the Nikkei and had a volatile day. The start of the session saw Nikkei up as much as 2% taking JPY crosses, especially USDJPY, higher with it. But after the lunch recess, the Nikkei plunged to reverse these gains, which led to a sharp reversal in JPY crosses. Japan’s leading and coincident index both eased in September early estimates, suggesting that economic activity is beginning to expand less quickly though growth remains solid through 2017. The leading index eased to 106.6 from 107.2 in August, indicating that a set of indicators that include new job offers, new machinery orders, consumer confidence and new housing construction, among others, were softer. Coincident index, which comprise of a set of gauges that include industrial production, power consumption, durable consumer goods, and retail sales, among others, fell to 115.8 from 117.7 in Aug. Other reports from Japan this morning came in a tad softer. Core machine orders, a gauge on demand, fell 3.5% YoY in September, unravelling the rebound of 4.4% in August. Meanwhile, the current account surplus narrowed to 2271.0b in September, down from 2380.4b

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

Technical: 1-3 Day View –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 113.30/10 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: Bearish
Trading Take-away: Sidelines

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

Technical: 1-3 Day View – The breach of range support at 132 concerns the broader bullish bias, however without sustained daily closes below this level the risk remains a return to middle of the 134.50 /131.50 range, below 131.50 opens 130.66

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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