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The US Economy is Moving

Daily Analysis - 18/01/2018

Various Signs that the US Economy is Starting Up

us-economy


The US economy is bringing back volatility and traders have started feeling the heat. From following the economic calendar and announcements to the crude oil and the stock market. Apple paves the way for the corporate tax cut deal effect.

Is USD ready to gain back strength and momentum?


Following the US economy one can find a lot of opportunities in US indices such as Dow, S&P 500 and NASDAQ that hit record highs every single day or even trading on any FX US Dollar. As of now we did not experience any shocking data releases. Optimism over prospects for sustained strong global growth and improved corporate earnings have helped share markets rally at the start of 2018.

The surprises come from the US Administration decisions that are at times unpredictable thereby creating volatility while putting pressure on the US Dollar. Now the Congress needs to pass a spending bill by the end of Friday to avoid a government shutdown. And that is why the US Dollar is bleeding since the start of 2018.

US officials today are reporting some important leading indicators of the economy at 13:30 GMT. Forecasts show ahead of today’s release that U.S. housing starts and building permits probably slipped in December for the first time in three months as frosty winter weather delayed work. In the case where the actual reading would be in line with the expectations or better the US Dollar is expected to step on the breaks and start finding a support waiting for a retracement. On the other hand, should data be below estimates it could trigger more fear in the greenback.

At the same time, the Philadelphia Fed Manufacturing Index is reporting, where the data is compiled from a survey of about 250 manufacturers in the Philadelphia Federal Reserve district. Manufacturing is also a leading indicator that can have a big effect on the US Dollar and traders will be paying closer attention to their Economic Calendar.

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Crude Oil Inventories


Monday this week was a holiday in the US, MLK weekend, and thus the crude oil inventories are reported today. Crude oil prices rose earlier on data showing a decline in U.S. crude inventories. Instability in Nigeria also supported the crude prices to go higher as rebels threatened to attack the country’s petroleum infrastructure, before trimming their gains.

U.S. crude futures are trading around $64 a barrel, being near three-year highs. However, many analysts warned that the recent oil price rally could lose momentum. U.S. shale oil output is expected to increase by a good 111,000 barrels per day (bpd) next month to 10 million bpd, and will rise to about 11 million bpd by the end of next year.

This would put the U.S. on par with Saudi Arabia and Russia’s output. The frosty weather also supports the global demand for Crude oil as well as the healthy increase of the global growth and the OPEC-led production cuts last November extending the output cut deal to cover all of 2018.

Being in the markets for years, it is always beneficial to follow the correlated currencies with the crude oil prices, mainly the Canadian dollar where the correlation is positive.

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APPLE helps make America great again


Apple Inc. said it would pay a one-time tax of $38 billion on its overseas cash holdings and ramp up spending in the U.S., as it seeks to emphasize its contributions to the American economy after years of taking criticism for outsourcing manufacturing to China.

Apple is the world’s most valuable publicly traded company and on Wednesday it published a statement that was full of big figures reflecting Apple’s current pace of spending. It is expected to open a new campus as part of a five-year, $30 billion U.S. investment plan and will make about $38 billion in one-time tax payments on its overseas cash, one of the largest corporate spending plans announced since the passage of a tax cut signed by U.S. President Donald Trump.

The company has been under increasing pressure to make U.S. investments since the 2016 presidential campaign, when Trump targeted the iPhone maker for making products in Asian factories.

Summing up everything, Apple on Wednesday estimated it would spend $350 billion in the United States over the next five years. Trump described the move by Apple as a victory for his efforts. "I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States. Great to see Apple follow through as a result of TAX CUTS," Trump wrote on Twitter.

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GBP on a wild ride


The sterling sets a strong foot in 2018 looking to break the psychological levels that were created after the majority of the British people decided to exit the EU. [24.06.2016]

Following the negotiations, every time they were making headlines on major media outlets, a lot of trading opportunities were appearing. Below you can find a very useful infographic that can show you the remaining steps of the divorce. The GBPUSD chart supports the view from economists claiming British economy is on the up as fears of a hard Brexit have been elaborated and the EU and UK have made progress in the negotiations.

The sterling is flirting with the best levels against the greenback since the Brexit vote. With positive results and data from the UK economy continuing to positively surprise investors, we can see the pound trading in levels last seen before the Brexit vote. Yesterday it was trading near 1.3943 which is the best level for the last 23 months (2-year high).

The next Resistance waiting to test and maybe break lies at 1.4000 being the most important psychological level for the pair and could be a turning point for the strength of the two currencies.

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