EURUSD: Stay long for 1.1960

EUR/USD: U.S. House of Representatives passes tax bill

Macroeconomic overview:

• Congressional Republicans took important steps on Thursday toward U.S. tax-code overhaul, with the House of Representatives approving a broad package of tax cuts, and a Senate panel advancing its own version of the legislation sought by senior lawmakers and President Donald Trump.

• The House vote shifted the tax debate to the Senate, where a tax-writing panel finished debating and approved a bill late Thursday evening. That measure has already encountered resistance from some within the Republicans ranks. Full Senate action is expected after next week's Thanksgiving holiday.

• Four Republican senators - enough to derail the legislation - have been talking privately about opposing the bill because it would balloon the federal deficit, according to a Time magazine report.

• Trump, who is still seeking his first major legislative win since taking office in January, went to the U.S. Capitol just before the House vote to urge Republicans to pass the tax bill, which Democrats call a giveaway to the wealthy and businesses.

• Congress has not thoroughly overhauled the sprawling U.S. tax code since Republican Ronald Reagan was president. The House measure is not as comprehensive as Reagan's 1986 package, but it is more ambitious than anything since then.

• The path forward for the tax plan in the Senate, where Republicans have a narrow majority, is fraught with obstacles about concerns over the deficit, healthcare and the distribution of tax benefits. Republicans can lose no more than two Senate votes if Democrats remain united in opposition.

• Senate Republican tax-writers earlier this week made the risky decision of tying their plan to a repeal of the requirement for people to get healthcare insurance under former President Barack Obama's Affordable Care Act. That exposed the tax initiative to the same political forces that wrecked Republicans' anti-Obamacare push earlier in July.

• The House bill, estimated to increase the federal deficit by nearly USD 1.5 trillion over 10 years, would consolidate individual and family tax brackets to four from seven and reduce the corporate tax rate to 20% from 35%.

• It also would scale back or end some popular tax deductions, including one for state and local income taxes, while preserving a capped deduction for property tax payments.

• Democrats have pointed to analyses showing millions of Americans could end up with a tax hike because of eliminated deductions. Repealing or shrinking some deductions is a way to offset the revenue lost from tax cuts.

• Senate Democratic leader Chuck Schumer warned Republicans that by increasing the deficit, the tax bill would imperil other important priorities such as military spending.

• Thirteen House Republicans opposed the bill, all but one from New York, New Jersey or California - states with high taxes where residents would feel the pinch from eliminating the deduction for state and local income taxes.

• Investors have cheered the prospect of a tax overhaul. U.S. stocks rose and the dollar edged higher against a basket of major currencies on Thursday after the House vote. The USD reaction was short-lived. The EUR/USD climbed back above 1.1800 again during Asian trading hours.

• San Francisco Federal Reserve President John Williams reiterated his view that the U.S. economy is growing strongly enough for the Fed to continue raising rates gradually over the next couple of years to around 2.5%.

Technical analysis and trading signals:

• Positive cross on the 7/14 exponential moving averages is a bullish sign. We suggest the buy dips strategy. The nearest target is the October 1.1880 peak.

• We stay long for 1.1960.

 

USD/CAD: Eyes on inflation data and NAFTA renegotiations

Macroeconomic overview:

• Canadian manufacturing sales unexpectedly rose in September, boosted by sales of petroleum and coal products, data from Statistics Canada showed on Thursday. The 0.5% increase in total sales topped market forecasts for a 0.3% decline, while volumes rose 0.7%. August was downwardly revised to a gain of 1.4% from a previously reported 1.6% increase.

• The petroleum and coal industry led the way with a 10.3% increase in sales, amid higher prices and volumes. The gain was tempered by a 0.7% decline in the transportation sector as sales of motor vehicles and parts fell. Excluding vehicles, total manufacturing sales were up 1.4%.

• Overall new orders declined by 1.7% after a strong gain in August and as there was less demand in the aerospace and vehicles industries.

• Separate domestic data showed that foreign investors bought a net CAD 16.81 billion in Canadian securities in September.

• The firm data and a reduced gap between the yields on Canadian and U.S. government debt boosted the Canadian dollar.

• Prices of oil, one of Canada's major exports, rose on Friday but remained en route for their first week of losses in six, as concerns grew over Russia's support for an extension of the crude output cuts that have bolstered prices in recent months. An agreement by the Organization of the Petroleum Exporting Countries and other producers such as Russia to limit oil production has propped up prices in recent months, with the deal expected to be extended at the group's next meeting on November 30. Saudi Arabia has signalled a willingness to extend the curbs, which are due to expire in March 2018, with energy minister Khalid al-Falih saying on Thursday that targets to reduce global oil surplus would not be reached in time.

• CAD traders have also been focusing this week on the resumption of North American Free Trade Agreement (NAFTA) renegotiations. NAFTA working groups began meeting on Wednesday in Mexico. Talks will begin on Friday and continue through November 21.

• Canada’s inflation report for October will be released today.

Technical analysis and trading signals:

• Technical situation has not changed a lot since yesterday. The fact that the pair did not manage to break above the November 15 high at 1.2789 is encouraging for USD/CAD bears.

• We stay short for 1.2550.

 

TRADING STRATEGIES SUMMARY:

FOREX - MAJOR PAIRS:

FOREX - MAJOR CROSSES:

PRECIOUS METALS:

 

How to read these tables?

1. Support/Resistance - three closest important support/resistance levels

2. Position/Trading Idea:
   BUY/SELL - It means we are looking to open LONG/SHORT position at the Entry Price. If the order is filled we will set the suggested Target and Stop-loss level.
   LONG/SHORT - It means we have already taken this position at the Entry Price and expect the rate to go up/down to the Target level.

3. Stop-Loss/Profit Locked In - Sometimes we move the stop-loss level above (in case of LONG) or below (in case of SHORT) the Entry price. This means that we have locked in profit on this position.

4. Risk Factor - green "*" means high level of confidence (low level of uncertainty), grey "**" means medium level of confidence, red "***" means low level of confidence (high level of uncertainty)

5. Position Size (forex) - position size suggested for a USD 10,000 trading account in mini lots. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size). You should always round the result down. For example, if the result was 2.671, your position size should be 2 mini lots. This would be a great tool for your risk management!
   Position size (precious metals) - position size suggested for a USD 10,000 trading account in units. You can calculate your position size as follows: (your account size in USD/USD 10,000) * (our position size).

6. Profit/Loss on recently closed position (forex) - is the amount of pips we have earned/lost on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.
   Profit/Loss on recently closed position (precious metals) - is profit/loss we have earned/lost per unit on recently closed position. The amount in USD is calculated on the assumption of suggested position size for USD 10,000 trading account.