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US equity futures down on delayed vote, GBP extends gains

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The US Senate postponed the vote on Republicans tax reform, as three GOP senators asked for modification, worried that the tax overhaul would cost the federal government as much as $1.4 billion. The US equity futures retreated on delayed vote, after the stocks traded at fresh historical high levels on Thursday. The S&P500 (+0.82%) hit 2633.74, as the Dow Jones traded at 24327.82 for the first time. The VIX index advanced to 12%. The US 10-year yield jumped past 2.40%. The US dollar was mixed.
Gold rebounded from $1270, as buyers joined the market approaching the lower Bollinger band. The precious metal is better bid today and the recovery could extend toward the mid-Bollinger band ($1282) if the US dollar remains soft.
The yen weakened against the greenback for the fourth consecutive session, as Japans final manufacturing PMI came in slightly softer than expected. Improved US yields are supportive of a further bullish extension. After having rebounded from the Ichimoku cloud base (110.90), the USDJPY could advance to 113.00 (23.6% retrace on September November rise) and to the cloud top, 113.35.
The AUDUSD remains under the pressure of unattractive yield spread. The AU/US 2-year yield spread is negative, pushing the carry traders away from this market. The pair could extend losses toward 0.7530 (lower Bollinger band & November low), before testing the 0.7500. Resistance is eyed at 0.7600 (middle Bollinger band).
The EURUSD held ground at 1.1805 (major 38.2% retrace on November rebound & 100-day moving average) and recovered past the 1.19 mark in Asia. The Eurozones November inflation estimate accelerated from 1.4% to 1.5% year-on-year, slightly less than 1.6% expected by analysts. The core inflation was steady at 0.9%, compared with 1.0% expected. Soft inflation is not a new challenge for the European Central Bank (ECB) hawks and has not reversed the sentiment in euro. The Eurozones final manufacturing PMI will likely confirm a stronger activity in November and could boost the bulls appetite. In addition, a further weakness in the US dollar could underpin a bullish move toward the 1.20 psychological level. There are no option barriers at this level.
Cable extended gains to 1.3550. The positive trend gathers momentum and there is more potential to explore on the upside. The next resistance is eyed at 1.3657, the 2018 high. The UKs manufacturing PMI is due today. Analysts expect an improvement in the activity in November. A solid number could reinforce the buy side. On a side note, it is important to remember that the Brexit risks prevail, as the EU/UK agreement has not been officialized just yet.
The FTSE 100 (-0.90%) plunged on stronger pound on Thursday. Energy stocks (-1.00%) and industrials (-1.14%) led losses. The three-day negative trend is gaining momentum building a stronger case for a new slide below the 7300p level. The FTSE is set for a softer open. Resistance could be found at 7338p and 7364p (minor 23.6% and major 38.2% retracement).

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About the author

Ipek Ozkardeskaya is a senior analyst at MBAex with a solid experience in the financial industry. She has strong technical background in economics and quantitative finance. Previously, she worked as a senior market analyst in London Capital Group, FX strategist in Swissquote Bank and as a client sales executive at HSBC Private Bank in Geneva. She also developed quantitative models in automatic trading as part of BCV’s Structured Products team. Ipek has a Master’s degree in Financial Engineering & Risk Management and a Bachelor degree in Economics from University of Lausanne.
Contributing  author since 11/09/2017

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