President Trump’s ambitious tax-reform proposal sent stocks and shares higher last night, buoying confidence over corporate earnings and consumer spending.

The US dollar extended its gains too, with the US dollar index surging to a near-one-month high in the 93.3 area. Investors are also taking advantage of the recent pullback to buy technology shares. The Nasdaq rebounded over 1% last night.

Some key highlights of Trump’s tax reform proposal include slashing the corporate tax rate to 20% from the current 35%, to streamline individual tax brackets from seven to three (12%, 25%, 35%) and to apply a one-off levy on multinational companies’ accumulated offshore earnings, which total US$ 2.6 trillion. 

These measures, if successfully implemented, aim to significantly boost America’s corporate earnings and individual spending power, and encourage MNCs to repatriate their offshore profits back to the States. This ambition, however, will only play out if the Republican Party can pass the budget resolution and get Congress’ approval of the tax bill. 

The tax reform, together with the Fed’s tightening plans, has worked to strengthen the outlook of the US dollar. EUR/USD slid for a third consecutive day, registering a total loss of 1.7%. A head-and-shoulders pattern has formed on its daily chart, suggesting that bearish momentum is dominating. USD/JPY has broken out above the resistance level of 112.5, and its next resistance levels can be found at 114.3 and 114.9 respectively. 

Precious metal prices extended their losses due to the strong dollar and risk-on sentiment. The gold price has broken down below the key support level of $1,295 and is about to test the immediate support level at $1,282. 

The silver price is consolidating around its key support level of $16.78. Breaking down below this level would open room for more downside, toward the next support at the $16.48 area.

Technical Analysis:

Gold - Cash

  • 10-Day Simple Moving Average sloped downwards
  • SuperTrend (10,1.5) is trending downwards
  • Immediate support level at 1,282 (61.8% Fibonacci extension)
  • Momentum indicator MACD continued to trend lower, suggesting strong downward momentum

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