DJIA breaches record 24,000 level, sterling rallies due to Brexit optimism, gold continues its slump
As the Republicans’ tax reform programme reaches the final discussion and voting period, USA equities rallied, as confidence emerged that the necessary Senate votes would be captured, in order to push through the vote. The fly in the ointment is that the Republican Party only needs 2-3 of its Senators to vote against the programme, to prevent it becoming law. The DJIA and SPX rallied, with both indices reaching record intraday and closing highs, with the DJIA breaching the key psyche handle of 24,000. The SPX has now risen by circa 23% YoY and has enjoyed the strongest monthly gain witnessed since 2007. Having sold off sharply during yesterday’s trading session, tech shares in the NASDAQ recovered, with the index ending the day up circa 0.73%, delivering a 30% return YoY.
WTI oil was little changed, despite the OPEC meeting in Vienna resulting in an agreement to continue the production cuts deep into 2018. Gold slumped in the risk on trading environment, falling by circa 0.7% on the day and crashing through the 100 DMA. Bitcoin endured one of its typical roller coaster sessions; having breached 11,000 yesterday, reaching a high of circa 11,250, the crypto currency slumped by circa 22% at one stage on Thursday, falling to a low of 8,826, ending the day at circa 9,493.
The U.S. dollar slipped versus its main peers; EUR, GBP, JPY and CHF on Thursday, the backdrop of economic calendar data was overshadowed by the fixation with the tax debate on Capitol Hill. However, personal income has risen in the USA, as personal spending fell in October to 0.1%, down from the 0.5% growth registered in September. Initial jobless claims marginally beat the forecast, whilst continuous claims missed forecast, coming in at 1957k last week.
Sterling enjoyed a rally during Thursday’s trading sessions, the perceived wisdom is that Brexit negotiations are progressing well, according to the English speaking press, although the remaining E.U. 27 and their negotiating team, are puzzled as to what actual progress has been made. A major stumbling block, the Irish border issue, is now coming into sharp focus. The U.K. government’s loose partnership with the Northern Ireland party the DUP, which allows it to stumble over the line in a vote of no confidence, which could bring the government down, are now threatening to remove their support if the border issues isn’t resolved in their favour, at the expense of Eire (Ireland). Nationwide house prices fell back in the U.K. rising by only 0.1% in November, up 2.5% YoY.
Europe’s main equity markets sold off during Thursday’s trading sessions, Eurozone CPI came in at 1.5%, missing the forecast of 1.6%. German unemployment remained at 5.6%, German retail sales have experienced a mini slump, registering a fall to -1.2% in October and a fall to -1.4% YoY, from a 4.1% rise recorded in September, whilst Swiss GDP growth beat the economists’ forecasts, by registering a 1.2% YoY rise. The euro experienced gains versus all its peers of Thursday, with the exception of its fall of circa 0.4% versus the U.K. pound, owing more to the overwhelming pound strength.
USD/JPY whipsawed through a wide bullish range throughout Thursday’s sessions, rising through R1 as London/European markets opened, to then recede to the daily PP and give back the gains. The currency pair then regained its former momentum rising up through the two levels of support ending the day close to R2, up circa 0.6% on the day, at 112.5. Price has bounced off/rejected both the 100 and 200 DMAs, both sited at circa 115.5. USD/CHF breached the 200 DMA from the 22nd to 27th November, having rejected the critical moving average since, the pair whipsawed through a tight range on Thursday; rising through R1, falling back through the daily PP, to eventually breach S1, then rise and close out circa 0.2%, down at 0.993.
GBP/USD traded in a wide bullish range on Thursday, breaching R2, threatening to breach R3 before settling at circa 1.352, up approx 0.8% on the day, the highest level cable has reached in approx. two months. Sterling generated its biggest daily gains versus the New Zealand kiwi, GBP/NZD closing out above R3 at 1.978, up circa 1.2% on the day. Versus the rest of its currency peers sterling made significant gains, ranging from circa 0.4% to approx. 1.2% on the day.
EUR/USD initially fell, shortly after the London open, eventually breaching S1, thereafter the euro began a rally, eventually breaching R2, before falling back to end the day up circa 0.5%, at 1.189. EUR/GBP represented the only euro pair that fell during Thursday’s trading session, ending the day down circa 0.4%, at one point losing approx. 0.7%, when breaching S2. Euro made significant gains versus yen, as did most currencies, EUR/CHF proved to be a difficult cross pair to trade on Thursday as it whipsawed violently through a wide range; initially rising through R1, falling through S1 at approx 10:30 am London time, to then reverse taking out the three levels of resistance, eventually closing up circa 0.8% at 1.170.
From threatening to take out the key 1300 handle earlier in the week, XAU/USD has now reversed violently over recent days, as gold’s safe haven appeal has lost its allure. Crashing through the second level of resistance price reached a low of 1270, before recovering moderately, to close out the day at circa 1274. Having crashed through the 100 DMA over recent days analysts are now considering that the critical 200 DMA (sited at 1266) may be breached, if the risk on environment is maintained.
EQUITY INDICES SNAPSHOT FOR NOVEMBER 30th.
• DJIA closed up 1.39%.
• SPX closed up 0.82%.
• NASDAQ closed up 0.73%.
• FTSE 100 closed down 0.90%.
• DAX closed down 0.29%.
• CAC closed down 0.47%.
KEY ECONOMIC CALENDAR EVENTS FOR DECEMBER 1st.
• EUR Italian Gross Domestic Product w.d.a. (YoY) (3Q F).
• CAD Quarterly Gross Domestic Product (annualised) (3Q).
• CAD Unemployment Rate (NOV).
• USD ISM Manufacturing (NOV).
• USD ISM Employment (NOV).
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