Europe to open higher on commodity bounce

Jasper Lawler Trading Writers

US Markets Finished Steady As Investors Await Details on the Tax Reform

Wednesday’s US session had a definite wait and see feel about it. The Dow closed marginally lower and the S&P 500 flat, as investors paused, waiting for more details on what the reconciled US tax reform could look like. While the House and the Senate have both approved separate tax reform bills, these two versions are now being combined and agreed on, before being sent to the Whitehouse for signing.

Tax reform optimism has boosted the market since Trump was elected last year, but doubts over how stimulative the reform will actually be, have crept in over recent sessions, causing the US rally to slow and in some cases reverse. Tech stocks have been particularly hard hit this week, dropping close to 2%. However, bargain hunters were out in force on Wednesday and the tech heavy Nasdaq closed 0.2% higher.

Dollar Retains Buying Interest

In the forex market the dollar continues to be supported, with the dollar index climbing higher on Thursday morning, for its fourth straight session. Hopes that Congress will soon push the tax bill through, in addition to optimism over Friday’s non-farm payroll and expectations of a Fed rate hike next week, have all buoyed the buck. Since the dollar bounced off the low at $92.50, the bulls have been firmly in charge, pushing the dollar index towards the key level of $94.00. A break out above here, possibly on the back of a strong jobs report on Friday, could see the dollar advance to attack 95.15 (High Oct & Nov).

USD/JPY Strengthens as Safe Haven Flows Reverse

Earlier weakness in the USD/JPY has been reversed. The dollar was trading lower versus the Japanese yen, which experienced increased inflows under its safe haven status. Investor nerves that the US government could be shut down before the weekend, were reflected in a move to the safe haven yen. Furthermore, Trump’s recognition of Jerusalem, as Israel ‘s capital magnified these safe haven flows. However, appetite for the dollar nullified this trade relatively quickly.

FTSE Futures Point Higher

Looking ahead to the UK open, the FTSE is pointing to a positive start, building on the gains from the previous session. Stronger commodity prices such as copper and oil, which are rebounding in the Asian session after a recent rout, are expected to support the FTSE on the open.

Brexit Continues to Weigh on the Pound

A softer pound could also prop up the FTSE on Thursday. Fears growing over a Brexit deal not being reached before next week’s deadline, are weighing on sentiment for sterling. Whilst the pressure is on Theresa May to find a solution to the Irish border dispute, her own political stability is also looking increasingly questionable, with suggestions she could be toppled as soon as next week.

With little in the way of influential economic data, Brexit headline are expected to drive sterling price action.

The GBPUSD is trading at $1.3384, after hitting a low on Wednesday at $1.3358. It is so far remaining above the $1.33340 region where the next support can be found. On the upside, a break above the recent high of $1.3549 could see sterling target $1.3650 (Sept high).

Opening calls

FTSE to open 14 points higher at 7362

DAX to open 34 points higher at 13,032

CAC to open 6 points higher at 5380

Author

Jasper Lawler

Trading Writers

With 18 years of trading experience, Jasper began his career as a stockbroker on Wall Street in New York City before sharpening his analytical skills at top trading firms in the City of London.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.