Easymarkets easy letter: tax cuts boosted the US dollar index to a three-week high, investors waited for Yellen's congressional testimony

On Monday (February 13), the market’s optimistic expectations for US President Donald Trump’s tax reform policy warmed up, the dollar rebounded to a three-week high against a basket of currencies, and US stocks hit a record high for three consecutive days, and gold prices fell again on the same day. The minimum touch is $1219.45 per ounce. However, the political and economic uncertainties in Europe and the United States are expected to support gold prices in the short term. In addition, Federal Reserve Chairman Jannet Yellen will testify in Congress later on Tuesday, and if his comments are biased toward the hawks, it may further suppress the price of gold. Trump promised on Thursday (February 9) that a "significant" tax reform plan will be released. The White House said the plan would include tax cuts for businesses and individuals. Investors hope that Trump's tax reform commitment implies that the focus of the president and his assistants will shift from protectionism and national security to policies that promote economic growth. On Monday, the US dollar index hit a high of 101.11 since January 20, and rebounded for the third consecutive trading day. US stocks closed at a record high, and the market value of the S&P 500 index exceeded US$20 trillion; spot gold fell under pressure, further Stay away from the three-month high of $1244.67 per ounce touched last week. However, many European countries are the election year this year. The Netherlands bears the brunt and will hold elections in March, making the political prospects in the region full of uncertainty. France will follow closely, and the first round of elections will be held in April. The possibility of the election of Le Pen, the candidate of the National Front of the far-right party, has made France's political prospects confusing. The uncertainty caused by the French election is expected to provide strong support for the gold price.

In terms of economic data, the European Commission released its 2018 European economic growth forecast on Monday (February 13). It confirmed that although not as serious as before, the British economy will weaken due to the referendum. In the economic forecast report, the European Commission said that the UK economy will moderately weaken in 2017, and this trend will continue to deepen in 2018. These two years are the period when the UK will go to the EU to negotiate with the EU.

In the European region today, investors in the euro zone ushered in a series of heavy data tests in the euro zone, the most important of which is the fourth quarter GDP data of the euro zone. Recently, the economy of the Eurozone has clearly improved, and various economic indicators have shown signs of recovery. Although the eurozone is still affected by political worries, the eurozone GDP data, which may perform well, may provide some boost to the euro. In the UK, the UK will also release important CPI and retail sales data. Although the market is still speculating on the follow-up impact of the UK's hard Brexit, the current market focus has clearly shifted from British political concerns to the UK's own economic performance, recently. The UK economy is doing well, and if inflation and retail data continue to perform well, the pound is expected to be boosted. In New York time, pay attention to the most important impact on the market, Fed Chair Yellen’s half-year monetary policy report in the banking committee. At 23 o'clock in Beijing or earlier, the speech of this report will be announced. Recently, the market has doubts about the Fed’s three-year rate hike this year. In particular, non-farm payrolls showed slow salary growth last month, which may weigh on the Fed’s interest rate hike expectations. At the same time, there are certain differences within the Fed. Some members think that the rate of interest will rise three times during the year. Some members also believe that they can only raise interest rates once during the year. The speech of Federal Reserve Chairman Yellen will provide important guidance for balancing market expectations and giving the Fed a new rate hike path after a series of economic data after the year.

Financial calendar

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15:00 Germany's January CPI annual rate final value (%)

15:00 Germany's fourth quarter quarterly adjusted GDP quarterly initial value (%)

16:15 Swiss Consumer Price Index Annual Rate

16:15 Swiss Consumer Import Price Index Annual Rate

17:30 UK's January seasonally adjusted PPI annual rate (%)

17:30 UK January retail price index annual rate (%)

17:30 UK CPI annual rate (%)

18:00 German February ZEW Economic Climate Index

18:00 Eurozone December seasonally adjusted industrial output monthly rate (%)

18:00 Eurozone February ZEW Economic Climate Index

18:00 Eurozone fourth quarter quarterly adjusted GDP annual rate initial value (%)

21:30 US PPI annual rate (%)

23:00 US Federal Reserve Chairman Yellen provides testimony about US economic and monetary policy in Congress

Major currency reminder

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EUR/USD EURUSD

The euro oscillated down, refreshing the 3-week low, and the current exchange rate is trading near 1.0620. In addition to the US dollar index's rise in support of Trump's tax reform and Fed's interest rate hike expectations, the euro's political worries and the impact of Greek debt pressure are also important factors in the continued pressure on the euro. Tonight, Federal Reserve Chairman Yellen will make semi-annual monetary policy testimony on the Senate Finance Committee, which is the first time Trump has been president. The current lack of action on the US dollar is largely due to the market's belief that the Fed will likely raise interest rates up to two times this year, instead of the Fed's three hints at the monetary policy meeting. EUR/USD within the day: Downtrend. As long as there is still resistance at 1.0630, there is a bearish trend in price volatility. Pressure level: 1.0630-1.0670, support level: 1.0590-1.0540.

GBP/USD GBPUSD

On Tuesday (February 14), the GBP/USD maintained a narrow range of consolidation above the 1.25 mark after the opening bell. The risk of Brexit has weakened in the near future, the UK's own economic data is gratifying, and the Bank of England has expressed a more optimistic attitude. The pound market is expected to go up. Earlier this month, Bank of England Governor Carney gave a more positive response to the economy. Carney said the British economy was resilient after the Brexit and the Bank of England also reduced its actions before and after the Brexit referendum. The risk of jeopardizing the stability of the UK financial market. The pound/dollar is on the rise. The RSI technical indicator runs up. Pressure level: 1.2560-1.2610, support level: 1.2505-1.2466.

USD/JPY USDJPY

USD/JPY rebounded and rose to the highest level since January 30 to 114.16, as Trump said last week that it will introduce a major tax reform plan, and Trump at the US-Japan Leaders Summit The exchange rate issue was not discussed, and the poor performance of Japan’s fourth-quarter GDP data also boosted the USD/JPY. The data shows that the initial value of real GDP in the fourth quarter of Japan recorded 0.3%, which is consistent with the previous value and the estimated value. The initial value of the annual rate recorded 1%, lower than the previous value of 1.3% and the estimated value of 1.1%; nominal GDP The initial value of the quarterly rate was recorded at 0.3%, which was higher than the previous value of 0.1% but lower than the estimated value of 0.4%. A little late attention to the US PPI and core PPI data, but the market focus has turned to Fed Chair Janet Yellen will publish a semi-annual testimony on the economic and monetary policy in the Senate today, which is expected to trigger currency shocks. USD/JPY within the day: Be cautious. RSI technical indicators are running in a complex trend and should be handled with caution. Pressure level: 113.85-114.60, support level: 112.45-113.10.

AUD/USD AUDUSD

At the beginning of the Asian market today, Australia’s January NAB business climate index recorded 16 and the business confidence index recorded 10, both of which were better than the previous value. After the data was released, the Australian dollar rebounded from the low point to around 0.7681. Recently, several Fed officials spoke. To the market, it is not possible to rule out the possibility of a rate hike in March. Yellen’s speech this week is not expected to be more than expected. Therefore, the interest rate hike in March may increase, and the possibility of rising to nearly 50% is not ruled out. Since the Reserve Bank of Australia kept the historical low of 1.50% last week, the IMF recently warned that Australia's monetary policy should remain accommodative, which also suppressed the trend of the Australian dollar to some extent. AUD/USD on the day: RSI technical indicators are running upwards. Pressure level: 0.7690-0.7730, support level: 0.7635-0.7605.

USD/CAD USDCA D

Stronger exports of energy and non-energy commodities will widen the trade surplus in December, but moderately higher imports will provide a limited offset. The market will pay close attention to non-energy exports and is expected to continue to shrink, even if the Canadian dollar weakens. We expect Canada's January employment to increase by 10,000, in line with the employment trends of the previous months. However, most of the increase in employment is due to part-time work. USD/CAD within the day: Downtrend. The RSI technical indicator runs down. Pressure level: 1.3080-1.3125, support level: 1.3030-1.2985.

NZD/USD NZDUSD

The current NZD exchange dollar is lacking in action, and the shock is hovering around 0.7181. This is largely due to the market's belief that the Fed will likely raise interest rates up to two times this year, instead of the Fed's three hints at the monetary policy meeting. Concerned about whether Yellen can boost market expectations with a hawkish stance tonight. USD/NZD within the day: The short-term key resistance is at 0.7200. The RSI technical indicator runs down. Pressure level: 0.7200-0.7250, support level: 0.7105-0.7085.

Spot gold GOLD

At the beginning of the Asian market on Tuesday (February 14th), spot gold fluctuated within a tight range of 122.58 US dollars per ounce. The overall trading volume was relatively light. The market is waiting for the speech of Federal Reserve Chairman Yellen in the evening, but investors still need to pay attention to Trang. Relevant developments and performance of US stocks. At 23:00 in the evening, Federal Reserve Chairman Janet Yellen will publish semi-annual monetary policy testimony on the Senate Finance Committee, which needs to be focused. Investors will be concerned about whether Yellen will release relevant signals, such as whether the Fed is still on the track of raising interest rates three times, and when the next action will be taken. Within the day of gold: further rise. RSI technical indicators are running in a complex trend and tend to rise. Pressure level: 1234.00-1244.00, support level: 1224.00-1215.00.

NYMEX crude oil OIL

At the beginning of the crude oil market on Tuesday (February 14), oil prices rebounded slightly from overnight lows. US oil traded around US$52.95/barrel, an increase of about 0.34%; oil oil traded around US$55.62/barrel, an increase of about 0.49%. Oil prices closed down nearly 2% on Monday as fears of a rebound in US crude oil production rose again and the dollar rebounded. The latest OPEC monthly report shows that Saudi Arabia took the lead in reducing production, and OPEC's production reduction target has reached 93%. At present, the oil market is intertwined with long and short factors. Investors should pay close attention to US crude oil data and the trend of the US dollar. The current NZD exchange dollar is lacking in action, and the shock is hovering around 0.7181. This is largely due to the market's belief that the Fed will likely raise interest rates up to two times this year, instead of the Fed's three hints at the monetary policy meeting. Concerned about whether Yellen can boost market expectations with a hawkish stance tonight. Crude Oil (WTI) (H7) Intraday: Supported by an uptrend line. RSI technical indicators are supported by its uptrend line. Pressure level: 53.40-53.95, support level: 52.76-52.00.

Easymarkets

2017-2-16