Republicans gave up their pledge to repeal and replace Obama’s healthcare system, marking a major defeat in Trump’s healthcare policy, six months after his inauguration.

Senate Majority Leader Mitch McConnell announced this decision on Monday evening, immediately resulting in a drastic sell-off in the US dollar against its major peers. The US dollar index tumbled to a 14-month low of 94.5. 

Replacing Obamacare was one of the earliest policies initiated by the new administration early this year, followed by even more ambitious tax reform and financial deregulation plans. The failure of repealing Obamacare, however, highlights internal division in the party, leading to further doubts over Washington’s ability to carry out other reforms, such as tax and financial deregulation. The difficulties might have previously been overlooked, but it seems that now the market needs to face the reality. 

Republicans’ handling of healthcare reform has helped to drag Mr Trump’s approval rating down to 36%, according to a recent Washington Post-ABC News poll.

Unwinding activities were first observed in the forex market. The US dollar index tumbled further to the 94.5 area, while EUR/USD surged to its highest level in 15 months, in the 1.1544 area. USD/JPY fell to the 111.91 area, with immediate support and resistance levels at 111.39 and 114.17 respectively. 

US equity markets closed mixed last night, with the Dow Jones retracing 0.25% while the Nasdaq surged 0.47%. Banking stocks dragged down the Dow as Goldman Sachs’ trading revenue fell in spite of encouraging earnings. US banking stocks have entered into a consolidation phase recently, partly due to profit-taking activities and dwindling expectations around Trump’s future policies, intended to favour the financial sector. 

On the other hand, Netflix (+13.5%) led the Nasdaq into a record high after impressive earnings. 

The weak US dollar led to a rebound in precious metal prices. The gold price advanced further on Tuesday, to a two-week high in the S$1,243 area. Similarly, the silver price advanced to the $16.28 area, breaking out of the immediate resistance level of $16.17. Technical indicators suggest that both gold and silver prices have rebounded and entered into a bullish trend. Traders could watch the SuperTrend (10,2) and the 10-Day Simple Moving Average to monitor their trends.  

Technical analysis:

US Dollar Index Sep 2017 (30 mins)

  • 10-Day Simple Moving Average is sloped downwards
  • Broken down below 161.8% Fibonacci extension level, with the next support level at 94.43 area (200% Fibonacci level)

USD/JPY: 

  • SuperTrend (10, 1.5) has flipped downwards, indicating that the short side is taking control
  • 10-Day Simple Moving Average is sloped downwards, in line with the SuperTrend direction
  • Momentum indicator DMI formed a bearish crossover, indicating a bearish trend

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