US and European equities rebounded sharply last night on news that President Trump’s core team in the White House have reached common ground to push hard for tax reform, in order to revitalise the economy and restore market confidence.

Although tax reform has been Trump’s top priority since day one, there were no concrete details listed out yet. Investor confidence was hurt after the failure to repeal Obamacare and violence in Charlottesville recently, which led to rising doubts over Trump’s ability to deliver on his promises. Therefore, any progress on the tax agenda is a relief, even though a deal is far from completion. 

‘Risk-on’ sentiment is back in the market and thus the US dollar index rebounded alongside US stocks. Favourable sentiment is spreading to Asian stocks, with most Asian markets opening higher this morning. The sustainability of the round of rebounds will largely depend on Trump’s reform agenda as well as central bank governors’ speeches in Jackson Hole this Thursday night US time (early Friday mornign Singapore time). The key messages from Yellen and Draghi are expected to spike volatility in the FX market. 

The stronger dollar and resumed market confidence led to a sell-off in precious metals. The gold price fell from a two-month high and is going to form a ‘triple top’ chart pattern if it continues to head south. The silver price is consolidating around the $16.9 area, with immediate support and resistance levels at $16.78 and $17.16 respectively. Crude oil prices were little changed last night, as traders await weekly DoE commercial crude inventory tonight to assess the supply-demand conditions. 

The Hong Kong stock market opening is delayed today due to a typhoon signal No 10. Trading in the HKEX will be suspended all day if the typhoon signal remains in place until 12 noon. 

Technical Analysis:

US Dollar Index Sep 2017

  • 10-Day Simple Moving Average has flipped upward (bullish signal)
  • Immediate support level at 92.6 area (161% Fibonacci extension level)
  • Immediate resistance level at 94.0 (100% Fibonacci extension level)
  • An upward-sloped ‘channel’ has formed in the chart patterns, suggesting more upside

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